Schwab 2008 Annual Report

A
DIFFERENT
KINDof FIRM
2 0 0 8 A N N U A L R E P O R T
table of contents
01 Letter From the CEO
05 2008 Results
06 Letter From the CFO
08 Financial Highlights
09 Growth In Client Assets & Accounts
10 Executive Management
11 Form 10-K
i Board of Directors
ii Corporate Contacts & Information
Forward-Looking Statements: In addition to historical information, this Annual Report to Stockholders contains “forward-looking statements,”
which are identified by words such as “believe,” “anticipate,” “expect,” “intend,” “plan,” “will,” “may,” “estimate,” “aim,” “target,” and other similar
expressions. In addition, any statements that refer to expectations, projections, or other characterizations of future events or circumstances are forward-
looking statements. These forward-looking statements, which reflect management’s beliefs, objectives, and expectations as of the date hereof, are
necessarily estimates based on the best judgment of the company’s senior management. These statements relate to, among other things, the company’s
ability to reduce expenses and achieve a pre-tax margin (See “Letter from the Chief Financial Officer”). Achievement of the expressed beliefs, objectives,
and expectations described in these statements is subject to certain risks and uncertainties that could cause actual results to differ materially from the
expressed beliefs, objectives, and expectations. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak
only as of the date of this Annual Report to Stockholders. See “Forward-Looking Statements” in Management’s Discussion and Analysis of Financial
Condition and Results of Operations on page 38 in the Form 10-K for a discussion of important factors that may cause such differences.
A MEASURABLE
DIFFERENCE IN 2008, DURING ONE OF THE WORST FINANCIAL CRISES IN HISTORY,
WE STAYED THE COURSE WITH DISCIPLINED, COMMON-SENSE OPERATIONS
THAT REMAINED FOCUSED ON OUR CLIENTS’ NEEDS.
~ Walt Bettinger ~
President & Chief Executive Officer
TO MY FELLOW STOCKHOLDERS,
To manage through the financial crisis of 2008, But there were also bright spots during that difficult
Schwab maintained a conservative approach to risk quarter. In October, during one of the worst months
management, strict expense controls, and a relentless ever for the U.S. stock market, individual investors
focus on serving our clients. As our 2008 results clearly opened nearly 30,000 net new brokerage accounts
show, that common-sense approach continued to at Schwab, up 88 percent over October 2007. For the
make a difference for millions of Americans. full year, investors opened more than 889,000 new
brokerage accounts, up 10 percent year-over-year, while
New and existing Schwab clients brought in $113 billion in total brokerage accounts rose 5 percent to 7.4 million.
net new assets for the year – a number that was certainly
impacted by the financial crisis, but still averaged a very Corporate and Retirement Services added a record
healthy $2 billion per week in net new assets coming to 200,000 participants in 401(k) plans, boosting our
Schwab. Of that total, independent advisors accounted for total to 1.4 million participants – a 17 percent increase
more than half, or $60 billion in net new assets, including over the prior year.
a record $13 billion from advisors who chose to leave
established financial firms and set up shop as independent Charles Schwab Bank also continued to grow as
registered investment advisors. Another $18 billion in net banking accounts increased 71 percent to 447,000 at
new assets came from employers who work with Schwab year-end. The bank’s balance sheet assets of $25.4
to provide retirement services to their employees, with the billion were up 72 percent year-over-year.
balance of $35 billion in net new assets coming directly
from individual investors. It’s clear that people are voting with their
pocketbooks. And for every vote of confidence in
As of December 31, 2008, total client assets stood at $1.14 Schwab, we are grateful and profoundly aware of the
trillion, down from $1.45 trillion at year-end 2007 as a responsibility that comes with it.
result of the broad market declines that were upon us by
the fourth quarter of the year.

L E T T E R F ROM T H E
C H I E F E X E C U T I V E OF F IC E R
2008 FINANCIAL RESULTS 

Based on these strong client metrics, The Charles ,
Schwab Corporation posted a second consecutive
year of record financial operating results. For the 12
months ending December 31, 2008, results included
the following:
, ,
• Net revenues of $5.2 billion, up 3 percent versus

the prior year.
• Income from continuing operations of $1.2 billion,
for a 10 percent year-over-year gain.
• Diluted earnings per share from continuing 2008 NET REVENUES
operations of $1.06, up 15 percent from 92 cents (in millions)
per share the prior year.
• A record pre-tax profit margin of 39.4 percent,
Total Net Revenues = $5,150
compared to 37.1 percent one year ago.
Asset management and administration fees
KEYS TO SUCCESS Net interest revenue
Trading revenue
Other
So how did Schwab succeed when so many other
companies failed or faltered? Four factors contributed
to our success. on schwab.com – nearly two-thirds from “new to firm”
clients. Traffic increased at our branches, too, where we
1. We started the year on a firm financial footing. handled more than 5 million client interactions. In addition
to offering guidance through regular publications, we
Schwab entered this shaky environment with pre- invited more than 1.2 million households to a webcast or
tax margins approaching 40 percent, a strong balance local event with Schwab experts.
sheet, and limited exposure to the more “toxic” financial
instruments that brought down so many competitors. We seized other opportunities to build stronger client
We believe that’s the direct result of common-sense relationships. When businesses failed or filed for
financial strategies and conservative risk management, bankruptcy, we helped their employees determine
which Chief Financial Officer Joe Martinetto describes in their options with their 401(k) investments. When
more detail in his accompanying letter. many financial advisors decided to leave Wall Street,
Schwab provided what they needed to start their
Because we came into this crisis as a strong, solid, and own independent firms, or we matched them with
secure firm, we were able to operate from a position an existing firm. And when extreme market volatility
of strength. So when the deadline approached to apply spurred investors to move their money from equities
for funding from the federal Troubled Asset Relief to federally insured products, we made it easy with
Program, we declined to participate. Schwab CD OneSource®, a virtual marketplace of
FDIC-insured CDs from banks across the country.
2. We were there for people when they needed us most.
While serving clients remains our primary focus,
During these tough times, millions of people turned we know there are millions more who need help,
to Schwab for help. Calls to our service representatives particularly with financial literacy and personal finance
increased 5 percent to more than 10.3 million, while our skills. We continued our popular education and
automated systems handled an additional 16.8 million scholarship program with Boys & Girls Clubs of
calls. New online accounts grew by more than 30 percent America, and we expanded the information available

Investor Services
Annual Revenues: $3.4 billion

Schwab’s traditional retail brokerage serves individual investors directly through our schwab.com website, at more
than 300 Schwab branches, or by phone. At year-end, Investor Services held $482.6 billion in client assets.
INSTITUTIONAL Services
advisor services
Annual Revenues: $1.3 billion
Advisor Services serves more than 5,500 independent investment advisory firms. At year-end, it custodied $477.2
billion in client assets.
corporate and retirement services

Annual Revenues: $504 million
Corporate and Retirement Services provides retirement, equity compensation, and other financial services to
corporations and their employees. At year-end, it accounted for $177.2 billion in assets under management.
through our schwabmoneywise.com website. Last year, services across our client base. The combined units
Charles Schwab Foundation also awarded scholarships represented $654.4 billion in total assets under
to 10 teens who received a perfect score on the National management at year-end.
Financial Literacy Challenge test.
Serving different types of clients generates different sources
3. Our business model helped us weather the storm. of revenue. That, in turn, helps provide more stability for
our performance during up and down market cycles.
In keeping with our purpose to help everyone be
financially fit, we’ve created a simple yet flexible business 4. We were disciplined and diligent in managing expenses.
model that serves individual investors, independent
investment advisors, and company benefit plan sponsors. Over the course of the year, the Federal Reserve
cut interest rates repeatedly in a series of moves
Investor Services, our traditional retail investing and to promote capital liquidity in the markets. Rates
brokerage unit, helps make financial services more eventually came down to less than one-quarter of
accessible, affordable, and understandable for individual 1 percent, putting additional pressure on our net
investors. Last year, Investor Services generated about two- interest income, which accounted for roughly 30
thirds of our total revenue and profits, and it accounted percent of revenue in 2008. In addition, the steep
for total client assets of $482.6 billion at year-end. decline in market valuations took its toll on client
portfolios, and that will continue to impact our
We also generated strong results through our asset management fees, which contributed about
“business-to-business” segment, which has 45 percent of revenue last year.
been reorganized into Institutional Services.
We consolidated support capabilities for our In response to this extraordinary environment, our
institutional clients, including independent, fee- sustained expense discipline enabled us to finish the
based advisors and company retirement plan year with a record 39.4 percent pre-tax profit margin as
sponsors, to deliver the best of Schwab’s institutional well as a 31 percent return on equity. Expense discipline

is not simply an exercise for challenging times; it is We believe that our strategy and our business model
an imperative in every environment. After all, our are sound. Our balance sheet is healthy, simple, and
stockholders count on us to treat every dollar as if it straightforward. Our capital position is strong, and
were our very own. we have multiple sources of liquidity. When the
financial environment turns around, our sound
MAKING A DIFFERENCE approach to financial management will help propel
our competitive momentum.
To every Schwab employee who made our 2008 results
possible, I extend my deep, personal gratitude. Your A DIFFERENT KIND OF FIRM
commitment to both great client service and careful
expense management boosted our income and As I close my first letter to our valued stockholders, I’d
earnings per share to new highs. like to emphasize the things that remain true to Schwab,
no matter how stormy the external environment may be.
So many Schwab employees have been on the front
lines – and supported the front lines – during this Our Commitment to Clients: We pledge to deliver
financial crisis, and our clients have noticed your premier service, build trusting client relationships, offer
hard work. Time and again, we’ve heard positive client competitive pricing, and continue the great Schwab legacy
comments such as: “In troubling times like these, the of innovation – both in products and in technology.
representative I spoke to acknowledged what was going
on from my point of view and was completely calm and Our Commitment to Stockholders: We pledge to be
professional. I appreciate that very much.” vigilant in terms of risk management and expense controls
– treating every dollar of expense as if it came from our
When times got tougher during the fourth quarter, our own wallet – as we work to enhance stockholder value.
Schwab employees continued to go the extra mile for
our clients. As just one example, many San Francisco- Our Commitment to Employees: We pledge to invest
based employees volunteered to serve on a special “Flex in our people and the resources needed to grow this
Force” team to answer client phone calls during times company for years to come.
of peak volume. In other cases, our teams continued
to work on priority projects, such as the relaunch of These fundamental commitments are deeply rooted in our
schwab.com and the introduction of The Schwab Bank purpose of helping everyone be financially fit. Our values
Invest First™ Visa Signature® credit card, which offers ensure that we manage this firm ethically and responsibly
best-in-class 2 percent cash back on all purchases. as we continually strive to do the right thing for our
clients, our stockholders, and our employees. That has
One of the hardest things I’ve had to do as President been Chuck Schwab’s philosophy in creating the kind of
and CEO is to authorize job cuts, but we must right- company he’d want to do business with. It’s my privilege
size the company for current conditions and then move to lead an experienced and passionate team that has taken
forward together, building an even stronger Schwab up that banner, as the advocate for savers and investors.
brand. To those former Schwab employees we had to let
go, you have my heartfelt gratitude and admiration for
your many contributions.
SOUND FOOTING
Schwab is in solid financial shape, and we finished 2008

strong. But we face stiff headwinds as we move into
2009. It would be hard to top two consecutive years of
record operating results even in the best of times. And, Walt Bettinger
as we know, these are far from the best of times. March 12, 2009

2008
R e sult s
NET NEW CLIENT ASSETS (1) TOTAL CLIENT ASSETS

(in billions) (in billions, at year end)
$83.3 $160.2 $113.4 $1,239 $1,446 $1,137
2006 2007 2008 2006 2007 2008
INCOME FROM
NET REVENUES (2) CONTINUING OPERATIONS (2)
(in millions) (in millions)
$4,309 $4,994 $5,150 $891 $1,120 $1,230
2006 2007 2008 2006 2007 2008
EARNINGS PER SHARE

FROM CONTINUING OPERATIONS (2) PRE-TAX PROFIT MARGIN (2)
(diluted)
$.69 $.92 $1.06 34.3% 37.1% 39.4%
2006 2007 2008 2006 2007 2008
(1) Effective 2007, amounts include the Company’s mutual fund clearing services business’ daily net settlements. All prior period amounts have been recast to reflect this change.
(2) Amounts are presented on a continuing operations basis to exclude the impact of the sale of U.S. Trust Corporation, which was completed on July 1, 2007.

DIFFERENT and
DISCIPLINED JUDGMENT IS CRUCIAL AS WE BALANCE NEAR-TERM PROFITABILITY,

INVESTMENTS TO DRIVE FUTURE GROWTH,
AND A RELENTLESS CLIENT FOCUS.
~ Joe Martinetto ~
Executive Vice President & Chief Financial Officer
Those of you who are familiar with Schwab’s recent history our operating scale and expense discipline into profit
are aware that our business model has evolved substantially margin and earnings growth, and then leveraging capital
over the years as we’ve developed a more comprehensive discipline into even higher earnings per share growth.
set of products and services to help investors achieve their Part of the formula’s power is that it works across a broad
financial goals. By 2007, we earned less than 20 percent of range of conditions – even when economic growth is
our revenues from client trading activity, down from 53 slowing and rates are moving toward cyclical lows. In
percent in 1999. At the same time, asset management and extraordinary circumstances, however, just mechanically
administration fees tied to our mutual fund and advice following the formula when factors beyond our control
offerings had risen to about 45 percent of total net revenues, are pushing revenues down significantly might not be in
and net interest revenue relating to our cash management our clients’ or stockholders’ best interests.
and banking offerings totaled about a third.
For example, clinging to a particular expectation for
We’ve certainly built a more diverse and stable revenue profitability or EPS growth might lead to expense cuts so
stream compared to the trading-dependent Schwab of old. severe that our client service capabilities are impaired, or to
If, however, someone wanted to test our current business capital levels that provide a thinner-than-desired cushion
model by throwing us into the toughest operating against potential stresses on the company’s balance sheet.
environment imaginable, it’s hard to see how they could
have done better than what we actually faced in 2008: a With a 40 percent drop in the broad equity indices during
faltering economy weighing on our clients’ willingness 2008 and a decline in the Fed Funds rate from 4.25 percent
and ability to invest in the capital markets; declining to essentially zero, it was clear we needed to act. Our
equity values pressuring our asset-based revenues; and philosophy of taking the long view in building value for
falling interest rates squeezing the spread revenue we clients and stockholders meant that our path was also clear:
earn on cash balances. balance the more aggressive expense management needed
to offset declining revenues against the ongoing investment
In my letter to you last year, I discussed how our baseline needed to drive future growth. We also recognized the need
formula for financial management focuses on leveraging to work with the other elements of the formula under our

C H I E F F I NA NC I A L OF F IC E R
control – a relentless focus on our clients and their needs, environments, nor do we think you’d want us to impose
as well as careful risk and capital management – in order to one. Instead, we believe the ongoing application of
deliver the strongest possible near-term performance while judgment in determining and maintaining the right mix
protecting our longer term opportunities. of operating costs, investments for the future, and current
profitability will enable us to maximize the company’s
Did our balancing act succeed in 2008? As Walt has shared long-term value to clients, stockholders, and employees.
with you in the preceding CEO letter, by sticking to our
strategy and putting the needs of our clients first and There are, however, certain areas where you can expect
foremost, we were rewarded with another year of strong a more dogmatic approach from us in running Schwab.
asset inflows as clients remained engaged in managing their First, the company’s struggles following the Internet bubble
financial affairs. provided a firm reminder that we cannot solve revenue or
profitability challenges by imposing on the goodwill and
This success with clients, in turn, helped asset management loyalty of our clients. Our pricing, client service capabilities,
and administration fees stay comparable to 2007 levels and product offerings must remain competitive through
and net interest revenue to rise by 1 percent despite the all environments, and we’ll just have to make the tradeoffs
deteriorating environment, while trading revenue actually necessary to ensure that happens.
rose by 26 percent. With overall net revenues up by 3 percent
and minimal impact from the ongoing mortgage and credit In addition, we intend to sustain a conservative approach
market meltdowns, we were largely able to concentrate to managing financial risk at Schwab. Our philosophy is
on sustaining our momentum, and we even increased straightforward – we’re not trying to eliminate risk across
our marketing investment by approximately 6 percent. our businesses, but we do expect to identify and manage
Our ongoing efforts to improve operating efficiency and it on a continuing basis. Schwab exists to help investors
leverage the scale in our support enterprises enabled us to become financially fit, and we intend to earn our keep
trim overall expenses by 1 percent, which in turn led to a by serving that need, not by artificially manipulating the
39.4 percent pre-tax profit margin and a 10 percent increase balance sheet, wandering into activities where we lack core
in income from continuing operations to $1.2 billion, both competencies or clear client need, or chasing after higher
records, as well as a 31 percent return on equity. returns on our investments without regard for credit quality.
As we think about the outlook for 2009, we have to We may very well have more tough choices to make before
acknowledge that, as of today, there’s no positive catalyst in the operating environment improves, but the old expression
sight for the economy or those two big external influences “That’s why it’s called management” comes to mind –
on our revenues – short-term rates and equity valuations. if all we had to do was set and then rigidly follow a
Given that these drivers are starting out dramatically lower formula, you’d rightfully be asking what the Schwab
than a year ago, we believe this is a case where even more executive team was doing with the rest of our time.
aggressive measures are called for if we wish to maintain Whatever 2009 and beyond holds in store for us, I can
critical investments for the future and still deliver the solid assure you that this team is dedicated to coming to work
financial performance our owners expect. As a result, we every day with the goal of finding a better way to serve
currently plan to cut our total expenses by 7 to 8 percent clients, and then turning that success into standout financial
between 2008 and 2009. This reduction will come from performance. We hope to earn your continued support.
lower levels of staffing, professional services, development
projects, and certain aspects of our marketing efforts.
Including these expense cuts – but excluding any related
charges – we’d expect to achieve a pre-tax margin of at least
30 percent for 2009 if equity valuations and short-term Joe Martinetto
rates are consistent with or above year-end 2008 levels. March 12, 2009
I should note there’s no bright line here in terms

of minimum performance expectations in tough

FINANCIAL HIGHLIGHTS
growth rate
1-YEAR
(In Millions, Except Per Share Amounts, Ratios, or as Noted) 2007-08 2008
2008 2007 2006
Net revenues 3% $ 5,150 $ 4,994 $ 4,309

Expenses excluding interest (1% ) $ 3,122 $ 3,141 $ 2,833
Net income N/M $ 1,212 $ 2,407 $ 1,227
Income from continuing
operations per share – basic 15% $ 1.07 $ 0.93 $ 0.70
Income from continuing
operations per share – diluted 15% $ 1.06 $ 0.92 $ 0.69
Basic earnings per share N/M $ 1.06 $ 1.99 $ 0.97
Diluted earnings per share N/M $ 1.05 $ 1.97 $ 0.95
Dividends declared per common share 10% $ 0.220 $ 0.200 $ 0.135
Special dividend per common share N/M $ - $ 1.00 $ -
Weighted-average common shares
outstanding – diluted (5% ) 1,157 1,222 1,286
Closing market price per share (at year end) (37% ) $ 16.17 $ 25.55 $ 19.34
Book value per common share (at year end) 9% $ 3.51 $ 3.22 $ 3.96
Net revenue growth 3% 16% 19%
Pre-tax profit margin from continuing operations 39.4% 37.1% 34.3%
Return on stockholders’ equity 31% 55% 26%
Full-time equivalent employees
(at year end, in thousands) 1% 13.4 13.3 12.4
Net revenues per average
full-time equivalent employee (in thousands) (1% ) $ 383 $ 387 $ 362
Note: All amounts are presented on a continuing operations basis to exclude the impact of the sale of U.S. Trust Corporation, which was completed on July 1, 2007.
N/M Not Meaningful.

GROWTH IN CLIENT ASSETS & ACCOUNTS
growth rates
compounded annual
4-year 1-year
Billions, at Year End, Except as Noted)
(In 2004-08 2007-08 2008 2007 2006 2005 2004
Assets in Client Accounts
Schwab One®, other cash equivalents
and deposits from banking clients 9% 24% $ 44.4 $ 35.9 $ 31.0 $ 31.3 $ 31.7
Proprietary funds (Schwab Funds®
and Laudus Funds®):
Money market funds 18% 15% 209.7 183.1 135.0 110.6 107.0
Equity and bond funds 1% (42% ) 33.9 58.7 56.2 39.2 33.0
Total proprietary funds 15% 1% 243.6 241.8 191.2 149.8 140.0
Mutual Fund Marketplace : ® (1)
Mutual Fund OneSource® (4% ) (39% ) 110.6 180.9 163.2 137.8 129.7
Mutual fund clearing services 5% (34% ) 54.2 81.8 62.1 60.2 44.2
Other third-party mutual funds 10% (25% ) 169.1 225.7 173.1 142.7 114.4
Total Mutual Fund Marketplace 4% (32% ) 333.9 488.4 398.4 340.7 288.3
Total mutual fund assets 8% (21% ) 577.5 730.2 589.6 490.5 428.3
(1)
Equity and other securities (2% ) (34% ) 357.2 545.2 487.0 422.4 387.3
Fixed income securities 12% 13% 164.1 145.8 142.0 119.7 104.5
Margin loans outstanding (11% ) (47% ) (6.2 ) (11.6 ) (10.4 ) (10.4 ) (9.8 )
Total client assets 5% (21% ) $ 1,137.0 $ 1,445.5 $ 1,239.2 $ 1,053.5 $ 942.0
Client Assets by Business
Investor Services - (23% ) $ 482.6 $ 625.3 $ 567.5 $ 507.8 $ 485.3
Advisor Services 8% (18% ) 477.2 583.5 502.5 407.0 348.2
Corporate & Retirement Services 13% (25% ) 177.2 236.7 169.2 138.7 108.5
Total client assets by business 5% (21% ) $ 1,137.0 $ 1,445.5 $ 1,239.2 $ 1,053.5 $ 942.0
Net Growth in Assets in Client Accounts
(for the year ended)
Net new assets
Investor Services 43% (9% ) $ 35.1 $ 38.6 $ 26.7 $ 16.3 $ 8.4
Advisor Services 16% (8% ) 60.2 65.6 51.4 42.1 32.7
Corporate & Retirement Services 4% (68% ) 18.1 56.0 5.2 21.2 15.6
(2, 3)
Total net new client assets 19% (29% ) $ 113.4 $ 160.2 $ 83.3 $ 79.6 $ 56.7
(3)
Net market (losses) gains (421.9 ) 46.1 102.4 31.9 54.6
Net (decline) growth $ (308.5 ) $ 206.3 $ 185.7 $ 111.5 $ 111.3
New Brokerage Accounts
(in thousands, for the year ended) 13% 10% 889 809 655 568 538
(4)
Clients (in thousands)
Active Brokerage Accounts 1% 5% 7,401 7,049 6,737 7,049 7,252
Banking Accounts N/A 71% 447 262 147 N/A N/A
(5)
Corporate Retirement Plan Participants N/A 17% 1,407 1,205 542 N/A N/A
Note: All amounts are presented on a continuing operations basis to exclude the impact of the sale of U.S. Trust Corporation, which was completed on July 1, 2007.
(1) Excludes all proprietary money market, equity, and bond funds.
(2) Includes inflows of $17.8 billion in 2007 related to the acquisition of The 401(k) Company. Includes inflows of $3.3 billion, $3.6 billion, and $6.0 billion in 2007, 2006, and 2004
respectively, related to a mutual fund clearing services client. Includes an outflow of $19.5 billion in 2006 related to a mutual fund clearing services client who completed the
transfer of these assets to an internal platform. Effective 2007, amount includes balances covered by 401(k) record keeping-only services, which totaled $5.2 billion at May 31, 2007, related to
the March 2007 acquisition of The 401(k) Company.
(3) Effective 2007, amounts include the Company’s mutual fund clearing services business’ daily net settlements, with a corresponding change in net market gains (losses). All prior period amounts
have been recast to reflect this change.
(4) Periodically, the Company reviews its active account base. The Company identified over 400,000 brokerage accounts that met its current definition of active, but had little
or no balances and no likelihood of further activity. Effective March 31, 2006, the Company removed these accounts from its active brokerage account total. Amounts for
periods prior to 2006 were not adjusted. While the Company adjusted its definition of an active brokerage account to exclude certain zero and minimal balance accounts,
the basic definition remains “accounts with balances or activity within the preceding 8 months.”
(5) 2007 includes increases of 398,000 related to the acquisition of The 401(k) Company and 100,000 related to Personal Choice Retirement participants at Schwab.

E X E C U T I V E management
Charles R. Schwab
Founder and Chairman of the Board
•
Walter W. Bettinger II
President and Chief Executive Officer
•
JAY L. ALLEN
Executive Vice President,
Human Resources and Employee Services
BENJAMIN L. BRIGEMAN
Investor Services
JOHN S. CLENDENING
Shared Strategic Services
CARRIE E. DWYER
General Counsel and Corporate Secretary
LISA K. HUNT
Schwab Investor Development
JAN HIER-KING
Shared Support Services
JOSEPH R. MARTINETTO
Executive Vice President and
Chief Financial Officer
JAMES D. McCOOL
Institutional Services
RANDALL W. MERK
Investment Management Services
REBECCA SAEGER
Chief Marketing Officer

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2008 Commission file number 1-9700
THE CHARLES SCHWAB CORPORATION

(Exact name of registrant as specified in its charter)
Delaware 94-3025021
(State or other jurisdiction (I.R.S. Employer Identification Number)
of incorporation or organization)
120 Kearny Street, San Francisco, CA 94108

(Address of principal executive offices and zip code)
Registrant’s telephone number, including area code: (415) 636-7000
Securities registered pursuant to Section 12(b) of the Act:

Title of each class Name of each exchange on which registered
Common Stock - $.01 par value per share The Nasdaq Stock Market
Securities registered pursuant to Section 12(g) of the Act: Common Stock - None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes No
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act.
Yes No
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K.
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting
company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange
Act.
Large accelerated filer Accelerated filer
Non-accelerated filer (Do not check if a smaller reporting company) Smaller reporting company
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No
As of June 30, 2008, the aggregate market value of the voting stock held by non-affiliates of the registrant was $19.6 billion. For purposes of
this information, the outstanding shares of Common Stock owned by directors and executive officers of the registrant, and certain investment
companies managed by Charles Schwab Investment Management, Inc. were deemed to be shares of the voting stock held by affiliates.
The number of shares of Common Stock outstanding as of January 30, 2009, was 1,157,306,315.
DOCUMENTS INCORPORATED BY REFERENCE
Part III of this Form 10-K incorporates certain information contained in the registrant’s definitive proxy statement for its annual meeting of
stockholders, to be held May 14, 2009, by reference to that document.
Annual Report On Form 10-K

For Fiscal Year Ended December 31, 2008
TABLE OF CONTENTS
Part I
Item 1. Business ------------------------------------------------------------------------------------------------------------------------------- 1

General Corporate Overview ----------------------------------------------------------------------------------------------- 1
Acquisition and Divestitures ------------------------------------------------------------------------------------------------ 1
Business Strategy and Competitive Environment ----------------------------------------------------------------------- 1
Products and Services ------------------------------------------------------------------------------------------------------- 2
Regulation --------------------------------------------------------------------------------------------------------------------- 5
Sources of Net Revenues ---------------------------------------------------------------------------------------------------- 6
Available Information ------------------------------------------------------------------------------------------------------- 6
Item 1A. Risk Factors -------------------------------------------------------------------------------------------------------------------------- 6
Item 1B. Unresolved Securities and Exchange Commission Staff Comments --------------------------------------------------------- 11
Item 2. Properties ----------------------------------------------------------------------------------------------------------------------------- 11
Item 3. Legal Proceedings ------------------------------------------------------------------------------------------------------------------- 11
Item 4. Submission of Matters to a Vote of Security Holders -------------------------------------------------------------------------- 11
Part II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases
of Equity Securities ---------------------------------------------------------------------------------------------------------- 12
Item 6. Selected Financial Data ------------------------------------------------------------------------------------------------------------- 14
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations ----------------------------- 15
Overview ---------------------------------------------------------------------------------------------------------------------- 15
Current Market Environment ----------------------------------------------------------------------------------------------- 17
Results of Operations -------------------------------------------------------------------------------------------------------- 17
Liquidity and Capital Resources ------------------------------------------------------------------------------------------- 26
Risk Management ------------------------------------------------------------------------------------------------------------ 31
Fair Value of Financial Instruments --------------------------------------------------------------------------------------- 36
Critical Accounting Estimates ---------------------------------------------------------------------------------------------- 36
Forward-Looking Statements ----------------------------------------------------------------------------------------------- 38
Item 7A. Quantitative and Qualitative Disclosures About Market Risk ----------------------------------------------------------------- 40
Item 8. Financial Statements and Supplementary Data ---------------------------------------------------------------------------------- 42
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure ----------------------------- 83
Item 9A. Controls and Procedures ------------------------------------------------------------------------------------------------------------ 83
Item 9B. Other Information ------------------------------------------------------------------------------------------------------------------- 83
Part III
Item 10. Directors, Executive Officers, and Corporate Governance -------------------------------------------------------------------- 83

Item 11. Executive Compensation ----------------------------------------------------------------------------------------------------------- 85
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters------------------ 85
Item 13. Certain Relationships and Related Transactions, and Director Independence ---------------------------------------------- 85
Item 14. Principal Accountant Fees and Services ------------------------------------------------------------------------------------------ 86
Part IV
Item 15. Exhibits and Financial Statement Schedule -------------------------------------------------------------------------------------- 86

Exhibit Index ----------------------------------------------------------------------------------------------------------------- 86
Signatures --------------------------------------------------------------------------------------------------------------------- 91
Index to Financial Statement Schedule ----------------------------------------------------------------------------------- F-1
PART I
Item 1. Business
General Corporate Overview
The Charles Schwab Corporation (CSC), headquartered in San Francisco, California, was incorporated in 1986 and engages,
through its subsidiaries (collectively referred to as the Company, and primarily located in San Francisco except as indicated),
in securities brokerage, banking, and related financial services. At December 31, 2008, the Company had $1.137 trillion in
client assets, 7.4 million active brokerage accounts (a) , 1.4 million corporate retirement plan participants, and 447,000
banking accounts. Significant subsidiaries of CSC include: Charles Schwab & Co., Inc. (Schwab), which was incorporated in
1971, is a securities broker-dealer with 306 domestic branch offices in 45 states, as well as a branch in each of the
Commonwealth of Puerto Rico and London, U.K., and serves clients in Hong Kong through one of CSC's subsidiaries;
Charles Schwab Bank (Schwab Bank), which commenced operations in 2003, is a federal savings bank located in Reno,
Nevada; and Charles Schwab Investment Management, Inc. (CSIM) is the investment advisor for Schwab’s proprietary
mutual funds, which are referred to as the Schwab Funds.
The Company provides financial services to individuals and institutional clients through three segments – Investor Services
(formerly called Schwab Investor Services), Advisor Services (formerly called Schwab Institutional®), and Corporate and
Retirement Services (formerly called Schwab Corporate and Retirement Services). The Investor Services segment includes
the Company’s retail brokerage and banking operations. The Advisor Services segment provides custodial, trading and
support services to independent investment advisors (IAs). The Corporate and Retirement Services segment provides
retirement plan services for employers and employees, as well as support services for plan administrators. For financial
information by segment for the three years ended December 31, 2008, see “Item 8 – Financial Statements and Supplementary
Data – Notes to Consolidated Financial Statements – 21. Segment Information.”
As of December 31, 2008, the Company had full-time, part-time and temporary employees, and persons employed on a
contract basis that represented the equivalent of about 13,400 full-time employees.
Acquisition and Divestitures
On July 1, 2007, the Company completed the sale of all of the outstanding stock of U.S. Trust Corporation (USTC, and with
its subsidiaries collectively referred to as U.S. Trust). U.S. Trust was a subsidiary that provided wealth management services.
U.S. Trust is presented as a discontinued operation for all periods prior to the completion of the sale. All other information
contained in this Annual Report on Form 10-K is presented on a continuing operations basis unless otherwise noted.
On March 31, 2007, the Company completed its acquisition of The 401(k) Company, which offers retirement plan services.
The acquisition enhanced the Company’s ability to meet the needs of retirement plans of all sizes. The acquisition also
provided the opportunity to capture rollover accounts from individuals participating in retirement plans served by The 401(k)
Company and to cross-sell the Company’s other investment and banking services to plan participants.
In 2004, the Company sold its capital markets business, consisting of partnership interests of Schwab Capital Markets L.P.
and all of the outstanding capital stock of SoundView Technology Group, Inc. (collectively referred to as Schwab Soundview
Capital Markets, or SSCM).
Business Strategy and Competitive Environment
The Company’s purpose is to help everyone become financially fit. The Company’s strategy is to meet the financial services
needs of individual investors both directly and indirectly through its three segments. The Company provides clients with a
compelling combination of personalized relationships, superior service, and great value, delivered through a blend of people
and technology. People provide the client focus and personal touch that are essential in serving investors, while technology
(a) Accounts with balances or activity within the preceding eight months.
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helps create services that are scalable and consistent. This combination helps the Company address a wide range of client
needs – from tools and information for self-directed or active investors, to advice services, to retirement and equity-based
incentive plans, to support services for independent IAs – while enabling each client to easily utilize some or all of these
capabilities according to each client’s unique circumstances.
The Company’s competition in serving individual investors includes a wide range of brokerage, wealth management, asset
management firms, banks, and trust companies. In serving these investors and competing for a growing percentage of the
investable wealth in the U.S., the Company offers a multi-channel service delivery model which includes branch, telephonic,
and online capabilities. Under this model, the Company can offer personalized service at competitive prices while giving
clients the choice of where, when, and how they do business with the Company. Schwab’s branches and regional telephone
service centers are staffed with trained and experienced financial consultants (FCs) focused on building and sustaining client
relationships. The Company offers the ability to meet client investing needs through a single ongoing point of contact, even as
those needs change over time. In particular, management believes that the Company’s ability to provide those clients seeking
help, guidance, or advice with an integrated, individually tailored solution – ranging from occasional consultations to an
ongoing relationship with a Schwab FC or an IA – is a competitive strength compared to the more fragmented offerings of
other firms.
The Company’s online and telephonic channels provide quick and efficient access to an extensive array of information,
research, tools, trade execution, and administrative services, which clients can access according to their needs. For example,
as clients trade more actively, they can use these channels to access highly competitive pricing, expert tools, and extensive
service capabilities – including experienced, knowledgeable teams of trading specialists and integrated product offerings.
Individuals investing for retirement through 401(k) plans can take advantage of the Company’s bundled offering of multiple
investment choices, education, and third-party advice. Management also believes the Company is able to compete with the
wide variety of financial services firms striving to attract individual client relationships by complementing these capabilities
with the extensive array of investment, banking, and lending products and services described in the following section.
In the IA arena, the Company competes with institutional custodians, traditional and discount brokers, banks, and trust
companies. Management believes that its Advisor Services segment can maintain its market leadership position primarily
through the efforts of its expanded sales and support teams, which are dedicated to helping IAs grow, compete, and succeed
in serving their clients. In addition to focusing on superior service, Advisor Services competes by utilizing technology to
provide IAs with a highly-developed, scalable platform for administering their clients’ assets easily and efficiently. Advisor
Services sponsors a variety of national, regional, and local events designed to help IAs identify and implement better ways to
grow and manage their practices efficiently.
Another important aspect of the Company’s ability to compete is its ongoing focus on efficiency and productivity, as lower
costs give the Company greater flexibility in its approach to pricing and investing for growth. Management believes that this
flexibility remains important in light of the current competitive environment, in which a number of competitors offer reduced
online trading commission rates and account fees, as well as lower expense ratios on certain classes of mutual funds.
Additionally, the Company’s nationwide marketing effort is an important competitive tool because it reinforces the attributes
of the Schwab brand.
Products and Services
The Company offers a broad range of products to address individuals’ varying investment and financial needs. Examples of
these product offerings include:
 Brokerage – various asset management accounts including some with check-writing features, debit card, and billpay;
individual retirement accounts; retirement plans for small to large businesses; 529 college savings accounts;
separately managed accounts; designated brokerage accounts; equity incentive plan accounts; and margin loans, as
well as access to fixed income securities and equity and debt offerings;
 Banking – first mortgages, home equity lines of credit, pledged-asset loans, certificates of deposit, demand deposit
accounts, high-yield investor checking accounts linked to brokerage accounts, and credit cards;
 Trust – trust custody services, personal trust reporting services, and administrative trustee services; and
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 Mutual funds – third-party mutual funds through Mutual Fund Marketplace, including no-load mutual funds
through the Mutual Fund OneSource service, proprietary mutual funds from two fund families – Schwab Funds
and Laudus Funds, other third-party mutual funds, and mutual fund trading and clearing services to broker-dealers.
These products, and the Company’s full array of investing services, are made available through its three segments – Investor
Services, Advisor Services, and Corporate and Retirement Services.
Investor Services
Through the Investor Services segment, the Company provides retail brokerage and banking services to individual investors.
Most clients with assets totaling $250,000 or more at Schwab have a specific FC designated as their primary point of contact
for utilizing Schwab’s services.
The Company offers research, analytic tools, performance reports, market analysis, and educational material to all clients.
Clients looking for more guidance have access to online portfolio planning tools, as well as professional advice from
Schwab’s portfolio consultants who can help develop an investment strategy and carry out investment and portfolio
management decisions.
Schwab strives to demystify investing by educating and assisting clients in the development of investment plans. Educational
tools include workshops, interactive courses, and online information about investing. Additionally, Schwab provides various
internet-based research and analysis tools which are designed to help clients achieve better investment outcomes. As an
example of such tools, Schwab Equity Ratings is a quantitative model-based stock rating system which provides all clients
with ratings on approximately 3,000 stocks, assigning each equity a single grade: A, B, C, D, or F. Stocks are rated based on
specific factors relating to fundamentals, valuation, momentum, and risk and ranked so that the number of ‘buy consideration’
ratings – As and Bs – equals the number of ‘sell consideration’ ratings – Ds and Fs.
Clients may need specific investment recommendations either from time to time or on an ongoing basis. The Company seeks
to provide clients seeking advice with customized solutions. The Company’s approach to advice is based on long-term
investment strategies and guidance on portfolio diversification and asset allocation. This approach is designed to be offered
consistently across all of Schwab’s delivery channels.
Schwab Private ClientTM features a personal advice relationship with a designated FC, supported by a team of investment
professionals who provide individualized service, a customized investment strategy developed in collaboration with the client,
and ongoing guidance and execution.
For clients seeking a relationship in which investment decisions are fully delegated to a financial professional, the Company
offers several alternatives. The Company provides investors access to professional investment management in a diversified
account that is invested exclusively in mutual funds through the Schwab Managed PortfolioTM program. The Company also
refers investors who want to utilize a specific third-party money manager to direct a portion of their investment assets to the
Schwab Managed Account program. In addition, clients who want the assistance of an independent professional in managing
their financial affairs may be referred to IAs in the Schwab Advisor Network. These IAs provide personalized portfolio
management, financial planning, and wealth management solutions.
The Company strives to deliver information, education, technology, service, and pricing which meet the specific needs of
clients who trade actively. Schwab offers integrated Web- and software-based trading platforms, which incorporate intelligent
order routing technology, real-time market data, options trading, premium stock research, and multi-channel access, as well as
sophisticated account and trade management features, risk management tools, decision support tools, and dedicated personal
support.
The Company serves both foreign investors and non-English-speaking U.S. clients who wish to trade or invest in U.S. dollar-
based securities. The Company has a physical presence in the United Kingdom and Hong Kong. In the U.S., the Company
serves Chinese-, Korean-, Spanish-, and Vietnamese-speaking clients through a combination of its branch offices and Web-
based and telephonic services.
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Advisor Services
Through the Advisor Services segment, Schwab provides custodial, trading, technology, practice management, trust asset, and
other support services to IAs. To attract and serve IAs, Advisor Services has a dedicated sales force and service teams
assigned to meet their needs.
IAs who custody client accounts at Schwab may use proprietary software that provides them with up-to-date client account
information, as well as trading capabilities. The Advisor Services website is the core platform for IAs to conduct daily
business activities online with Schwab, including submitting client account information and retrieving news and market
information. This platform provides IAs with a comprehensive suite of electronic and paper-based reporting capabilities.
Advisor Services offers online cashiering services, as well as internet-based eDocuments sites for both IAs and their clients
that provide multi-year archiving of online statements, trade confirms and tax reports, along with document search
capabilities.
To help IAs grow and manage their practices, Advisor Services offers a variety of services, including marketing and business
development, business strategy and planning, and transition support. Regulatory compliance consulting and support services
are available, as well as website design and development capabilities. Advisor Services maintains a website that provides
interactive tools, educational content, and research reports to assist advisors thinking about establishing their own independent
practices.
In addition, Advisor Services offers an array of services to help advisors establish their own independent practices through the
Business Start-up Solutions package. This includes access to dedicated service teams and outsourcing of back-office
operations, as well as third-party firms who provide assistance with real estate, errors and omissions insurance, and company
benefits.
The Company offers a variety of educational materials and events to IAs seeking to expand their knowledge of industry issues
and trends, as well as sharpen their individual expertise and practice management skills. Advisor Services updates and shares
market research on an ongoing basis, and it holds a series of events and conferences every year to discuss topics of interest to
IAs, including business strategies and best practices. The Company sponsors the annual IMPACT® conference, which
provides a national forum for the Company, IAs, and other industry participants to gather and share information and insights.
IAs and their clients have access to a broad range of the Company's products and services, including managed accounts and
cash products.
Corporate and Retirement Services
Through the Corporate and Retirement Services segment, the Company provides retirement plan services, plan administrator
services, advice services, education, stock plan services, and mutual fund clearing services, and supports the availability of
Schwab proprietary mutual funds on third-party platforms. The Company serves all aspects of employer sponsored plans:
equity compensation, defined contribution plans, defined benefit plans, and other investment related benefits plans.
The Company’s bundled 401(k) retirement plan product offers plan sponsors a wide array of investment options, trustee
services, and participant-level recordkeeping. Plan design features which increase plan efficiency and achieve employer goals
are also offered, such as automatic enrollment, automatic fund mapping at conversion, and automatic contribution increases.
Services such as Roth 401(k) and designated brokerage accounts are also offered. The Company provides a robust suite of
tools to plan sponsors to manage their plans including plan-specific reports, studies and research, access to legislative updates
and benchmarking reports that provide perspective of their plan’s features compared with overall industry and segment-
specific plans. Participants in bundled 401(k) plans receive targeted education materials, have access to electronic tools and
resources, may attend onsite and virtual seminars, and can receive customized advice provided by a third party.
Participants in 401(k) plans administered by Corporate and Retirement Services have access to personalized advice online, by
phone, or in person, including recommendations specific to the core investment fund choices in their retirement plan and
specific recommended savings rates. Advice services include the automatic rebalancing of participant accounts to maintain
proper asset allocations.
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The Company’s equity compensation product offers plan sponsors full-service recordkeeping for stock plans: stock options,
restricted stock, performance shares and stock appreciation rights. Specialized services for executive transactions and
reporting, grant acceptance tracking and other services are offered to employers to meet the needs of administering the
reporting and compliance aspects of an equity compensation plan.
In the Company’s Plan Administrator Services business, the Company and third-party administrators work together to serve
plan sponsors, combining the consulting and administrative expertise of the administrator with the Company’s investment,
technology, participant education and trustee services.
Schwab also offers its proprietary mutual funds on third party retirement platforms, allowing plan sponsors outside of the
Company’s bundled platform access to the Schwab Managed Retirement Trust Fund family. These target-date retirement
collective trusts have independent sub-managers and leverage both active and passive management, which offer institutional
structure and pricing.
Regulation
CSC is a savings and loan holding company and Schwab Bank, CSC’s depository institution subsidiary, is a federal savings
bank. CSC and Schwab Bank are both subject to supervision and regulation by the Office of Thrift Supervision (OTS). As a
savings and loan holding company, CSC is not subject to specific statutory capital requirements. However, CSC is required to
maintain capital that is sufficient to support the holding company and its subsidiaries’ business activities, and the risks
inherent in those activities.
Schwab Bank is subject to regulation and supervision and to various requirements and restrictions under federal and state
laws, including regulatory capital guidelines. Among other things, these requirements govern transactions with CSC and its
non-depository institution subsidiaries, including loans and other extensions of credit, investments or asset purchases,
dividends, and investments. The federal banking agencies have broad powers to enforce these regulations, including the
power to terminate deposit insurance, impose substantial fines and other civil and criminal penalties, and appoint a
conservator or receiver. Schwab Bank is required to maintain a capital level that at least equals minimum capital levels
specified in federal banking laws and regulations. Failure to meet the minimum levels will result in certain mandatory, and
possibly additional discretionary, actions by the regulators that, if undertaken, could have a direct material effect on Schwab
Bank.
The securities industry in the United States is subject to extensive regulation under both federal and state laws. Schwab and
401(k) Investment Services, Inc. (a subsidiary of The 401(k) Companies, Inc.) are registered as broker-dealers with the
Securities and Exchange Commission (SEC), the fifty states, and the District of Columbia and Puerto Rico. Schwab and
CSIM are registered as investment advisors with the SEC. Additionally, Schwab is regulated by the Commodities Futures
Trading Commission (CFTC) with respect to the futures and commodities trading activities it conducts as an introducing
broker.
Much of the regulation of broker-dealers has been delegated to self-regulatory organizations (SROs), namely the Financial
Industry Regulatory Authority, Inc. (FINRA), and the Municipal Securities Rulemaking Board (MSRB). Schwab is a member
of the Nasdaq Stock Market and the Chicago Board Options Exchange and is consequently subject to their rules and
regulations. The primary regulators of Schwab and 401(k) Investment Services, Inc. are FINRA and, for municipal securities,
the MSRB. The CFTC has designated the National Futures Association (NFA) as Schwab’s primary regulator for futures and
commodities trading activities. The Company’s business is also subject to oversight by regulatory bodies in other countries in
which the Company operates.
The principal purpose of regulating broker-dealers and investment advisors is the protection of clients and the securities
markets. The regulations to which broker-dealers and investment advisors are subject cover all aspects of the securities
business, including, among other things, sales and trading practices, publication of research, margin lending, uses and
safekeeping of clients’ funds and securities, capital adequacy, recordkeeping and reporting, fee arrangements, disclosure to
clients, fiduciary duties owed to advisory clients, and the conduct of directors, officers and employees.
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As registered broker-dealers, Schwab and 401(k) Investment Services, Inc. are subject to SEC Rule 15c3-1 (the Uniform Net
Capital Rule) and related SRO requirements. The CFTC and NFA also impose net capital requirements. The Uniform Net
Capital Rule specifies minimum capital requirements that are intended to ensure the general financial soundness and liquidity
of broker-dealers. Because CSC itself is not a registered broker-dealer, it is not subject to the Uniform Net Capital Rule.
However, if Schwab failed to maintain specified levels of net capital, such failure would constitute a default by CSC under
certain debt covenants.
The Uniform Net Capital Rule limits broker-dealers’ ability to transfer capital to parent companies and other affiliates.
Compliance with the Net Capital Rule could limit Schwab’s operations and its ability to repay subordinated debt to CSC,
which in turn could limit CSC’s ability to repay debt, pay cash dividends, and purchase shares of its outstanding stock.
Sources of Net Revenues
The Company’s major sources of net revenues are asset management and administration fees, net interest revenue, and trading
revenue. The Company generates asset management and administration fees through its proprietary and third-party mutual
fund offerings, as well as fee-based investment management and advisory services. Net interest revenue is the difference
between interest earned on interest-earning assets (such as cash, short- and long-term investments, and mortgage and margin
loans) and interest paid on funding sources (including deposits in banking and brokerage accounts, short-term borrowings,
and long-term debt). The Company generates trading revenues through commissions earned for executing trades for clients
and principal transaction revenues from trading activity in fixed income securities.
For revenue information by source for the three years ended December 31, 2008, see “Item 7 – Management’s Discussion and
Analysis of Financial Condition and Results of Operations – Results of Operations – Net Revenues.”
Available Information
The Company files annual, quarterly, and current reports, proxy statements, and other information with the SEC. You may
read and copy any document we file with the SEC at the SEC’s public reference room at 100 F Street, NE, Room 1580,
Washington, DC 20549. Please call the SEC at 1-800-SEC-0330 for information on the public reference room. The SEC
maintains an Internet website that contains annual, quarterly, and current reports, proxy and information statements, and other
information that issuers (including the Company) file electronically with the SEC. The SEC’s Internet website is
www.sec.gov.
On the Company’s Internet website, www.aboutschwab.com, the Company posts the following recent filings as soon as
reasonably practicable after they are electronically filed with or furnished to the SEC: the Company’s annual reports on
Form 10-K, the Company’s quarterly reports on Form 10-Q, the Company’s current reports on Form 8-K, and any
amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934. All
such filings are available free of charge either on the Company’s website or by request via email
(investor.relations@schwab.com), telephone (415-636-2787), or mail (Charles Schwab Investor Relations at
101 Montgomery Street, San Francisco, CA 94104).
Item 1A. Risk Factors
The Company faces a variety of risks that may affect its operations or financial results, and many of those risks are driven by
factors that the Company cannot control or predict. The following discussion addresses those risks that management believes
are the most significant, although there may be other risks that could arise, or may prove to be more significant than expected,
that may affect the Company’s operations or financial results.
For a discussion of the Company’s risk management, including technology and operating risk, credit risk, concentration risk,
market risk, fiduciary risk, and legal and regulatory risk, see “Item 7 – Management’s Discussion and Analysis of Financial
Condition and Results of Operations – Risk Management.”
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Developments in the business, economic, and geopolitical environment could negatively impact the Company’s
business.
The Company’s business can be adversely affected by the general environment – economic, corporate, securities market,
regulatory, and geopolitical developments all play a role in client asset valuations, trading activity, interest rates and overall
investor engagement, and are outside of the Company’s control. Deterioration in the housing and credit markets, reductions in
short-term interest rates, and decreases in securities valuations are negatively impacting the Company’s net interest revenue,
asset management and administration fees, and capital resources.
A significant decrease in the Company's liquidity could negatively affect the Company's business and financial
management as well as reduce client confidence in the Company.
Maintaining adequate liquidity is crucial to the business operations of the Company, including margin lending, mortgage
lending, and transaction settlement, among other liquidity needs. The Company meets its liquidity needs primarily through
cash generated by client activity and operating earnings, as well as cash provided by external financing. Fluctuations in client
cash or deposit balances, as well as changes in market conditions, may affect the Company’s ability to meet its liquidity
needs. A reduction in the Company’s liquidity position could reduce client confidence in the Company, which could result in
the loss of client accounts. In addition, if the Company’s broker-dealer or depository institution subsidiaries fail to meet
regulatory capital guidelines, regulators could limit the subsidiaries’ operations or their ability to upstream funds to CSC,
which could reduce CSC’s liquidity and adversely affect its ability to repay debt and pay cash dividends.
Factors which may adversely affect the Company’s liquidity position include a reduction in cash held in banking or brokerage
client accounts and/or a dramatic increase in the Company’s client lending activities (including margin and personal lending).
The Company also experiences liquidity demands as a result of brokerage client asset flows. In the ordinary course of
business, clients’ asset flows between cash balances and investment products and timing differences between when amounts
are segregated for regulatory purposes and when amounts are required to fund settlement of client transactions can create
significant daily changes in the Company’s cash position. The unpredictability of such timing differences and liquidity
demands has increased with recent market conditions as client asset flows have become more volatile.
When cash generated by client activity and operating earnings is not sufficient for the Company’s liquidity needs, the
Company must seek external financing. Due to significant disruptions in the credit and capital markets, potential sources of
external financing have been reduced for many firms, and borrowing costs have increased. Although CSC and Schwab
maintain uncommitted, unsecured bank credit lines and CSC has a commercial paper issuance program, as well as a universal
shelf registration statement filed with the SEC, financing may not be available on acceptable terms or at all due to market
conditions and disruptions in the credit markets. In addition, a significant downgrade in the Company’s credit ratings could
increase its borrowing costs and limit its access to the capital markets.
The Company may suffer significant losses from its credit exposures.
The Company’s businesses are subject to the risk that a client or counterparty will fail to perform its contractual obligations,
or that the value of collateral held to secure obligations will prove to be inadequate. While the Company has policies and
procedures designed to manage this risk, the policies and procedures may not be fully effective. The Company’s exposure
mainly results from margin lending activities, securities lending activities, mortgage lending activities, its role as a
counterparty in financial contracts and investing activities, and indirectly from the investing activities of certain of the
proprietary funds that the Company sponsors.
The Company has exposure to credit risk associated with its securities available for sale portfolio, which includes U.S. agency
and non-agency collateralized mortgage obligations and corporate debt securities among other investments. The Company’s
loans to banking clients primarily consist of first-lien mortgage loans and home equity lines of credit. Housing price declines,
increases in the unemployment rate, increases in delinquency and default rates, changes in the interest rate environment and
other economic factors can result in write-downs on such loans and the loss of value of securities available for sale and
securities held to maturity.
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Loss of value of securities available for sale and securities held to maturity can result in charges if management determines
that the impairments are other than temporary. The evaluation of whether other-than-temporary impairment exists is a matter
of judgment which includes the assessment of several factors. See “Item 7 – Management’s Discussion and Analysis of
Financial Condition and Results of Operations – Critical Accounting Estimates.” If management determines that a security is
other-than-temporarily impaired, the cost basis of the security must be adjusted to the then-current fair value and a
corresponding loss must be recognized in current earnings. Certain securities available for sale experienced deteriorating
credit characteristics in 2008. Further deterioration in the performance of securities available for sale could result in the
recognition of future impairment charges.
Heightened credit exposures to specific counterparties or instruments (concentration risk) can increase the Company’s risk of
loss. Examples of the Company’s credit concentration risk include:
 large investment positions in financial instruments collateralized by assets with similar economic characteristics or in
securities of a single issuer or industry;
 mortgage loans and home equity lines of credit to banking clients which are secured by properties in the same
geographic region; and
 margin and securities lending activities collateralized by securities of a single issuer or industry.
The Company may also be subject to concentration risk when lending to a particular counterparty, borrower or issuer.
The Company sponsors a number of proprietary money market funds. Although the Company has no obligation to do so, the
Company may decide for competitive reasons to provide credit, liquidity or other support to its funds in the event of
significant declines in valuation of fund holdings or significant redemption activity that exceeds available liquidity. Such
support could cause the Company to take significant charges and could reduce the Company’s liquidity. If the Company
chose not to provide credit, liquidity or other support in such a situation, the Company could suffer reputational damage and
its business could be adversely affected.
Significant interest rate changes could affect the Company’s profitability and financial condition.
The Company is exposed to interest rate risk primarily from changes in the interest rates on its interest-earning assets (such as
cash, short- and long-term investments, and mortgage and margin loans) relative to changes in the costs of its funding sources
(including deposits in banking and brokerage accounts, short-term borrowings, and long-term debt). Changes in interest rates
generally affect the interest earned on interest-earning assets differently than the interest the Company pays on its interest-
bearing liabilities. In addition, certain funding sources do not bear interest and their cost therefore does not vary. Overall, the
Company is positioned to benefit from a rising interest rate environment; the Company could be adversely affected by a
decline in interest rates if the rates that the Company earns on interest-earning assets decline more than the rates that the
Company pays on its funding sources, or if prepayment rates increase on the mortgages and mortgage-backed securities that
the Company holds. With the recent decline in interest rates, the Company's revenue from interest-earning assets has been
declining more than the rates that the Company pays on its funding sources. The Company may also be limited in the amount
it can reduce interest rates on deposit accounts and still offer a competitive return.
To the extent certain money market mutual funds replace maturing securities with lower yielding securities and the overall
yield on such funds falls to a level at or below the management fees on those funds, the Company may waive a portion of its
fee in order to continue providing some return to clients. Such fee waivers negatively impact the Company’s asset
management and adminisration fees.
The Company is subject to litigation and regulatory investigations and proceedings and may not always be successful
in defending itself against such claims or proceedings.
The financial services industry faces substantial litigation and regulatory risks. The Company is subject to arbitration claims
and lawsuits in the ordinary course of its business, as well as class actions and other significant litigation. The Company is
also the subject of inquiries, investigations, and proceedings by regulatory and other governmental agencies. Actions brought
against the Company may result in settlements, awards, injunctions, fines, penalties or other results adverse to the Company.
Predicting the outcome of matters is inherently difficult, particularly where claims are brought on behalf of various classes of
claimants, claimants seek substantial or unspecified damages, or when investigations or legal proceedings are at an early
-8-
stage. A substantial judgment, settlement, fine, or penalty could be material to the Company’s operating results or cash flows
for a particular future period, depending on the Company’s results for that period. In market downturns, the volume of legal
claims and amount of damages sought in litigation and regulatory proceedings against financial services companies have
historically increased. See “Item 3 – Legal Proceedings.”
From time to time, the Company is subject to litigation claims from third parties alleging infringement of their intellectual
property rights (e.g., patents). Such litigation can require the expenditure of significant Company resources. If the Company
was found to have infringed a third-party patent, or other intellectual property rights, it could incur substantial liability, and in
some circumstances could be enjoined from using certain technology, or providing certain products or services.
Extensive regulation of the Company’s businesses limits the Company’s activities and may subject it to significant
penalties.
As a participant in the securities, banking and financial services industries, the Company is subject to extensive regulation
under both federal and state laws by governmental agencies, supervisory authorities, and SROs. Such regulation is expected
to become more extensive and complex in response to the recent market disruptions. The requirements imposed by the
Company’s regulators are designed to ensure the integrity of the financial markets, the safety and soundness of financial
institutions, and the protection of clients. These regulations often serve to limit the Company’s activities by way of capital,
customer protection and market conduct requirements, and restrictions on the businesses in which the Company may operate.
Despite the Company’s efforts to comply with applicable regulations, there are a number of risks, particularly in areas where
applicable regulations may be unclear or where regulators revise their previous guidance. Any enforcement actions or other
proceedings brought by the Company’s regulators against the Company or its affiliates, officers or employees could result in
fines, penalties, cease and desist orders, enforcement actions, or suspension or expulsion, any of which could harm the
Company’s reputation and adversely affect the Company’s results of operations and financial condition.
Legislation or changes in rules and regulations could negatively impact the Company’s business and financial results.
New legislation, rule changes, or changes in the interpretation or enforcement of existing federal, state and SRO rules and
regulations may directly affect the operation and profitability of the Company or its specific business lines. The profitability
of the Company could also be affected by rules and regulations which impact the business and financial communities
generally, including changes to the laws governing taxation, electronic commerce, client privacy and security of client data.
The Company’s industry is characterized by aggressive price competition.
The Company continually monitors its pricing in relation to competitors and periodically adjusts trade commission rates,
interest rates on deposits and loans, fees for advisory services, and other fee structures to enhance its competitive position.
Increased price competition from other financial services firms, such as reduced commissions to attract trading volume or
higher deposit rates to attract client cash balances, could impact the Company’s results of operations and financial condition.
The industry in which the Company competes has undergone a period of consolidation.
The Company faces intense competition for the clients that it serves and the products and services it offers. There has been
significant consolidation as financial institutions with which the Company competes have been acquired by or merged into or
acquired other firms. This consolidation may continue. Competition is based on many factors, including the range of products
and services offered, pricing, customer service, brand recognition, reputation, and perceived financial strength. Consolidations
may enable other firms to offer a broader range of products and services than the Company does, or offer such products at
more competitive prices.
The Company faces competition in hiring and retaining qualified employees, especially for employees who are key to
the Company's ability to build and enhance client relationships.
The market for quality professionals and other personnel in the Company’s business is highly competitive. Competition is
particularly strong for financial consultants who build and sustain the Company’s client relationships. The Company’s ability
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to continue to compete effectively will depend upon its ability to attract new employees and retain existing employees while
managing compensation costs.
Technology and operational failures could subject the Company to losses, litigation, and regulatory actions.
The Company faces technology and operating risk which is the potential for loss due to deficiencies in control processes or
technology systems of the Company or its vendors that constrain the Company’s ability to gather, process, and communicate
information and process client transactions efficiently and securely, without interruptions. This risk also includes the risk of
human error, employee misconduct, external fraud, computer viruses, terrorist attacks, and natural disaster. The Company’s
business and operations could be negatively impacted by any significant technology and operational failures. Moreover,
instances of fraud or other misconduct, including improper use or disclosure of confidential client, employee, or company
information, might also negatively impact the Company's reputation and client confidence in the Company, in addition to any
direct losses that might result from such instances. Despite the Company’s efforts to identify areas of risk, oversee operational
areas involving risk, and implement policies and procedures designed to manage risk, there can be no assurance that the
Company will not suffer unexpected losses, reputational damage or regulatory action due to technology or other operational
failures, including those of its vendors.
The Company also faces risk related to its security guarantee which covers client losses from unauthorized account activity,
such as those caused by external fraud involving the compromise of clients’ login and password information. Losses
reimbursed under the guarantee could have a negative impact on the Company’s results of operations.
The Company relies on outsourced service providers to perform key functions.
The Company relies on service providers to perform certain key technology, processing, and support functions. These service
providers also face technology and operating risk and any significant failures by them, including the improper use or
disclosure of the Company’s confidential client, employee, or company information, could cause the Company to incur losses
and could harm the Company’s reputation. The Company also faces the risk that a service provider could, without adequate
notice, cease to provide services, which could disrupt the Company’s operations. Switching to an alternative service provider
may also require a transition period and result in less efficient operations.
Potential strategic transactions could have a negative impact on the Company’s financial position.
The Company evaluates potential strategic transactions, including business combinations, acquisitions, and dispositions. Any
such transaction could have a material impact on the Company's financial position, results of operations, or cash flows. The
process of evaluating, negotiating, and effecting any such strategic transaction may divert management’s attention from other
business concerns, and might cause the loss of key clients, employees, and business partners. Moreover, integrating
businesses and systems may result in unforeseen expenditures as well as numerous risks and uncertainties, including the need
to integrate operational, financial, and management information systems and management controls, integrate relationships
with clients and business partners, and manage facilities and employees in different geographic areas. In addition, an
acquisition may cause the Company to assume liabilities or become subject to litigation. Further, the Company may not
realize the anticipated benefits from an acquisition, and any future acquisition could be dilutive to the Company’s current
stockholders' percentage ownership or to earnings per share (EPS).
The Company’s acquisitions and dispositions are typically subject to closing conditions, including regulatory approvals and
the absence of material adverse changes in the business, operations or financial condition of the entity being acquired or sold.
To the extent the Company enters into an agreement to buy or sell an entity, there can be no guarantee that the transaction will
close when expected, or at all. If a material transaction does not close, the Company’s stock price could decline.
The Company's stock price has fluctuated historically, and may continue to fluctuate.
The Company's stock price can be volatile. Among the factors that may affect the Company's stock price are the following:
 speculation in the investment community or the press about, or actual changes in, the Company's competitive
position, organizational structure, executive team, operations, financial condition, financial reporting and results,
effectiveness of cost reduction initiatives, or strategic transactions;
- 10 -
 the announcement of new products, services, acquisitions, or dispositions by the Company or its competitors;
 increases or decreases in revenue or earnings, changes in earnings estimates by the investment community, and
variations between estimated financial results and actual financial results.
Changes in the stock market generally or as it concerns the Company's industry, as well as geopolitical, economic, and
business factors unrelated to the Company, may also affect the Company's stock price.
Item 1B. Unresolved Securities and Exchange Commission Staff Comments
None.
Item 2. Properties
A summary of the Company’s significant locations at December 31, 2008 is presented in the following table. Locations are
leased or owned as noted below. The square footage amounts are presented net of space that has been subleased to third
parties.
Square Footage
(amounts in thousands) Leased Owned
Location
Corporate office space:
San Francisco, CA (1) 1,273 -
Service centers:
Phoenix, AZ (2, 3) 154 709
Denver, CO (2) 274 -
Austin, TX (2) 146 -
Indianapolis, IN (2) - 113
Orlando, FL (2) 106 -
Other:
Richfield, OH (4) - 117
(1)
Includes Schwab headquarters.
(2)
Includes a regional telephone service center.
(3)
Includes two data centers and an administrative support center.
(4)
Includes the Corporate and Retirement Services division headquarters.
Substantially all of the Company’s branch offices are located in leased premises. The corporate headquarters, data centers,
offices, and service centers generally support all of the Company’s segments.
Item 3. Legal Proceedings
For a discussion of legal proceedings, see “Item 8 – Financial Statements and Supplementary Data – Notes to Consolidated
Financial Statements – 13. Commitments and Contingent Liabilities.”
Item 4. Submission of Matters to a Vote of Security Holders
During the fourth quarter of 2008, no matters were submitted to a vote of CSC's security holders.
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PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securities
CSC's common stock is listed on The Nasdaq Stock Market under the ticker symbol SCHW. The number of common
stockholders of record as of January 30, 2009 was 9,115. The closing market price per share on that date was $13.59.
The other information required to be furnished pursuant to this item is included in “Item 8 – Financial Statements and
Supplementary Data – Notes to Consolidated Financial Statements – 17. Employee Incentive, Deferred Compensation, and
Retirement Plans and 27. Quarterly Financial Information (Unaudited).”
The following graph shows a five-year comparison of cumulative total returns for CSC’s common stock, the Dow Jones U.S.
Investment Services Index, and the Standard & Poor’s 500 Index, each of which assumes an initial investment of $100 and
reinvestment of dividends.
$250
$200
The Charles Schwab Corporation
$150 Dow Jones U.S.

Investment Services Index
Standard & Poor' s 500 Index

$100
$50
12/31/03 12/31/04 12/31/05 12/31/06 12/31/07 12/31/08
December 31, 2003 2004 2005 2006 2007 2008

The Charles Schwab Corporation $ 100 $ 102 $ 126 $ 167 $ 234 $ 150
Dow Jones U.S. Investment Services Index $ 100 $ 108 $ 132 $ 178 $ 161 $ 53
Standard & Poor’s 500 Index $ 100 $ 111 $ 116 $ 135 $ 142 $ 90
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Issuer Purchases of Equity Securities
The following table summarizes purchases made by or on behalf of CSC of its common stock for each calendar month in the
fourth quarter of 2008.
Total Number Approximate

of Shares Purchased Dollar Value of
Total Number as Part of Publicly Shares that May
of Shares Average Announced Yet be Purchased
Purchased Price Paid Program (1) under the Program
Month (in thousands) per Share (in thousands) (in millions)
October:
Share Repurchase Program (1) - $ - - $ 596
Employee transactions (2) 217 $ 18.66 N/A N/A
November:
December:
Total:
N/A Not applicable.
(1)
There were no share repurchases under the Share Repurchase Program during the fourth quarter. Repurchases under this
program are under authorizations by CSC’s Board of Directors covering up to $500 million and $500 million of
common stock publicly announced by the Company on April 25, 2007 and March 13, 2008, respectively. The remaining
authorizations do not have an expiration date.
(2)
Includes restricted shares withheld (under the terms of grants under employee stock incentive plans) to offset tax
withholding obligations that occur upon vesting and release of restricted shares. The Company may receive shares to
pay the exercise price and/or to satisfy tax withholding obligations by employees who exercise stock options (granted
under employee stock incentive plans), which are commonly referred to as stock swap exercises.
- 13 -
Item 6. Selected Financial Data
Selected Financial and Operating Data

(In Millions, Except Per Share Amounts, Ratios, or as Noted)
Growth Rates
Compounded Annual
4-Year 1-Year
2004-2008 2007-2008 2008 2007 2006 2005 2004
Results of Operations
Net revenues 11% 3% $ 5,150 $ 4,994 $ 4,309 $ 3,619 $ 3,416
Expenses excluding interest 2% (1%) $ 3,122 $ 3,141 $ 2,833 $ 2,592 $ 2,869
Income from continuing operations 37% 10% $ 1,230 $ 1,120 $ 891 $ 634 $ 350
Net income (1) 43% N/M $ 1,212 $ 2,407 $ 1,227 $ 725 $ 286
Income from continuing operations per share — basic 42% 15% $ 1.07 $ .93 $ .70 $ .49 $ .26
Income from continuing operations per share — diluted 42% 15% $ 1.06 $ .92 $ .69 $ .48 $ .26
Basic earnings per share (1,2) 50% N/M $ 1.06 $ 1.99 $ .97 $ .56 $ .21
Diluted earnings per share (1,2) 50% N/M $ 1.05 $ 1.97 $ .95 $ .55 $ .21
Dividends declared per common share 31% 10% $ .220 $ .200 $ .135 $ .089 $ .074
Special dividend declared per common share N/M N/M $ - $ 1.00 $ - $ - $ -
Weighted-average common shares outstanding — diluted (4%) (5%) 1,157 1,222 1,286 1,308 1,365
Asset management and administration fees as a percentage of net revenues 46% 47% 45% 46% 45%
Net interest revenue as a percentage of net revenues 32% 33% 33% 28% 21%
Trading revenue as a percentage of net revenues (3) 21% 17% 18% 21% 30%
Effective income tax rate on income from continuing operations 39.3% 39.6% 39.6% 38.3% 36.0%
Capital expenditures — purchases of equipment, office facilities,
and property, net (4) 2% 15% $ 194 $ 168 $ 59 $ 78 $ 177
Capital expenditures, net, as a percentage of net revenues 4% 3% 1% 2% 5%
Performance Measures
Net revenue growth 3% 16% 19% 6% 5%
Pre-tax profit margin from continuing operations 39.4% 37.1% 34.3% 28.4% 16.0%
Return on stockholders' equity 31% 55% 26% 16% 6%
Financial Condition (at year end)

Total assets 2% 22% $ 51,675 $ 42,286 $ 48,992 $ 47,351 $ 47,133
Long-term debt 13% (2%) $ 883 $ 899 $ 388 $ 462 $ 533
Stockholders' equity (2%) 9% $ 4,061 $ 3,732 $ 5,008 $ 4,450 $ 4,386
Assets to stockholders' equity ratio 13 11 10 11 11
Long-term debt to total financial capital
(long-term debt plus stockholders' equity) 18% 19% 7% 9% 11%
Employee Information
Full-time equivalent employees(5) (at year end, in thousands) 3% 1% 13.4 13.3 12.4 11.6 11.8
Net revenues per average full-time equivalent employee (in thousands) 10% (1%) $ 383 $ 387 $ 362 $ 319 $ 260
Note: All information contained in this Annual Report on Form 10-K is presented on a continuing basis unless otherwise noted.
(1) Net income in 2007 includes a gain of $1.2 billion, after tax, on the sale of U.S. Trust.
(2) Both basic and diluted earnings per share include discontinued operations.
(3) Trading revenue includes commission and principal transaction revenues.
(4) Capital expenditures in 2006 are presented net of proceeds of $63 million primarily from the sale of a data center and in 2005 are presented net of proceeds of $20 million
from the sale of equipment.
(5) Full-time equivalent employees in 2007 includes 365 employees related to the acquisition of The 401(k) Company on March 31, 2007.
N/M Not meaningful.
- 14 -
Management’s Discussion and Analysis of Financial Condition and Results of Operations
(Tabular Amounts in Millions, Except Ratios, or as Noted)
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of

Operations
OVERVIEW
Management of the Company focuses on several key financial and non-financial metrics in evaluating the Company’s
financial position and operating performance. All information contained in this Annual Report on Form 10-K is presented on
a continuing operations basis unless otherwise noted. Results for the years ended December 31, 2008, 2007, and 2006 are
shown in the following table:
Growth Rate
1-year
2007-2008 2008 2007 2006
Client Activity Metrics:
Net new client assets (in billions) (1, 2) (29%) $ 113.4 $ 160.2 $ 83.3
Client assets (in billions, at year end) (21%) $ 1,137.0 $ 1,445.5 $ 1,239.2
Clients’ daily average trades (in thousands) 22% 346.6 284.9 270.0
Company Financial Metrics:
Net revenues 3% $ 5,150 $ 4,994 $ 4,309
Expenses excluding interest (1%) 3,122 3,141 2,833
Income from continuing operations before taxes on income 9% 2,028 1,853 1,476
Taxes on income 9% (798) (733) (585)
Income from continuing operations 10% 1,230 1,120 891
(Loss) income from discontinued operations, net of tax N/M (18) 1,287 336
Net income N/M $ 1,212 $ 2,407 $ 1,227
Earnings per share from continuing operations – diluted 15% $ 1.06 $ .92 $ .69
Earnings per share – diluted N/M $ 1.05 $ 1.97 $ .95
Net revenue growth from prior year 3% 16% 19%
Pre-tax profit margin from continuing operations 39.4% 37.1% 34.3%
Return on stockholders' equity 31% 55% 26%
Net revenue per average full-time equivalent employee
(in thousands) (1%) $ 383 $ 387 $ 362
(1)
Net new client assets in 2007 includes $23.0 billion related to the acquisition of The 401(k) Company and $3.3 billion
related to a mutual fund clearing services client.
(2)
Effective in 2007, amounts include the Company’s mutual fund clearing services business’ daily net settlements. All
prior period amounts have been recast to reflect this change.
N/M Not meaningful.
 Net new client assets is defined as the total inflows of client cash and securities to the firm less client outflows.
Management believes that this metric depicts how well the Company’s products and services appeal to new and
existing clients.
 Client assets is the market value of all client assets housed at the Company. Management considers client assets to be
indicative of the Company’s appeal in the marketplace. Additionally, fluctuations in certain components of client
assets (e.g., Mutual Fund OneSource funds) directly impacts asset management and administration fee revenues.
 Clients’ daily average trades is an indicator of client engagement with securities markets and the most prominent
driver of trading revenues.
 Management believes that net revenue growth, pre-tax profit margin from continuing operations, and return on
stockholders’ equity provide broad indicators of the Company's overall financial health, operating efficiency, and
ability to generate acceptable returns.
- 15 -
 Net revenue per average full-time equivalent employee is considered by management to be the Company’s broadest
measure of productivity.
revenue. The Company generates asset management and administration fees through its proprietary and third-party mutual
fund offerings, as well as fee-based investment management and advisory services. Net interest revenue is the difference
between interest earned on interest-earning assets and interest paid on funding sources. Asset management and administration
fees and net interest revenue are impacted by securities valuations, interest rates, the Company's ability to attract new clients,
and client activity levels. The Company generates trading revenues through commissions earned for executing trades for
clients and principal transaction revenues from trading activity in fixed income securities. Trading revenues are impacted by
trading volumes, the volatility of equity prices in the securities markets and commission rates.
2008 Compared to 2007
2008 was marked by extraordinary market conditions, including continued downward pressure on home prices, tighter credit
markets, liquidity concerns, significant volatility and sharp declines in the equity markets, and continued slowing of general
economic activity. The Nasdaq Composite Index, Standard and Poor’s 500 Index, and the Dow Jones Industrial Average
decreased during the year by 41%, 38%, and 34%, respectively, with a significant portion of these decreases occurring in the
fourth quarter. In addition, the federal funds rate decreased during the year by 4.25% to a range of zero to 0.25% at
December 31, 2008.
Even with this unprecedented market environment, clients remained actively engaged with the Company in managing their
investments and made heavy use of all of the Company’s service channels – branch, phone, and internet. Net new client assets
totaled $113.4 billion for the year, down 29% from a year ago, reflecting continued deterioration in the equity markets and
lower asset valuations. Total client assets were $1.137 trillion at December 31, 2008, down 21% from December 31, 2007.
Additionally, clients’ daily average trades increased 22% to 346,600 in 2008 from 2007.
Net revenues grew by 3% in 2008 from the prior year primarily due to an increase in trading revenue partially offset by a
decrease in other revenue. Trading revenue increased in 2008 primarily due to higher trading volume as a result of significant
volatility in the equity markets during the year. The decrease in other revenue in 2008 related to losses of $75 million on
investments in the Company’s securities available for sale portfolio. Asset management and administration fees remained
relatively flat in 2008 reflecting the Company’s ability to attract and retain clients. Net interest revenue increased by 1% in
2008 due to higher levels of interest-earning assets offset by the impact of a decrease in the average net yield earned on these
assets. Although expenses excluding interest remained relatively flat in 2008, compensation and benefits expense decreased
reflecting lower incentive compensation, while other expense and occupancy and equipment expense increased. The loss from
discontinued operations of $18 million in 2008 relates to the adjustment to finalize the income tax gain related to the sale of
U.S. Trust. As a result of the Company’s sustained expense discipline in 2008, the Company achieved a pre-tax profit margin
from continuing operations of 39.4% and return on stockholders’ equity of 31% in 2008. Return on stockholders’ equity in
2007 included a $1.2 billion after-tax gain on the sale of U.S. Trust, as well as incremental interest revenue generated from
temporarily investing the proceeds from the sale. Net revenue per average full-time equivalent employee was $383,000 in
2008, down 1% from 2007 as net revenue growth was lower than the increase in average full-time equivalent employees.
2007 Compared to 2006
Overall equity market returns for 2007 showed gains for the three major indices – the Nasdaq Composite Index increased by
10%, the Dow Jones Industrial Average increased 6%, and the Standard and Poor's 500 Index increased 4%.
Net new client assets totaled $160.2 billion for 2007, up 92% from 2006, which included $23.0 billion related to the
acquisition of The 401(k) Company in 2007. Total client assets were $1.446 trillion at December 31, 2007, up 17% from
December 31, 2006. Clients’ daily average trades increased 6% to 284,900 in 2007 from 2006.
- 16 -
Net revenues grew by 16% in 2007 as compared to 2006 primarily due to an increase in asset management and administration
fees driven by growth in client assets, as well as an increase in net interest revenue due to higher interest rate spreads.
Expenses excluding interest increased in 2007 as compared to 2006 primarily due to higher compensation and benefits
expense, advertising and market development expense, and professional services expense. The Company’s pre-tax profit
margin from continuing operations was 37.1% in 2007 as compared to 34.3% in 2006 due to revenue growth and disciplined
expense management during the year. Return on stockholders’ equity increased to 55% in 2007 as compared to 26% in 2006,
reflecting the sale of U.S. Trust, earnings growth, and the Company’s active management of its capital base. Net revenue per
average full-time equivalent employee was $387,000 in 2007, up 7% from 2006 due to revenue growth partially offset by the
increase in average full-time equivalent employees as a result of the acquisition of The 401(k) Company.
Certain reclassifications have been made to prior year amounts to conform to the current presentation. All references to EPS
information in this Management’s Discussion and Analysis of Financial Condition and Results of Operations reflect diluted
earnings per share unless otherwise noted.
CURRENT MARKET ENVIRONMENT
The adverse market conditions in 2008 discussed above continue to negatively impact the Company’s revenues.
The Company earns mutual fund service fees and asset management fees based upon daily balances of certain client assets.
Fluctuations in these client asset balances caused by changes in equity valuations directly impact the amount of fee revenue
earned by the Company. Continued depressed equity valuations in 2009 will negatively impact asset management and
administration fees on a year-over-year basis. Additionally, mutual fund service fees may be further reduced if the current
interest rate environment persists. To the extent certain money market mutual funds replace maturing securities with lower
yielding securities and the overall yield on such funds falls to a level at or below the management fees on those funds, the
Company may waive a portion of its fee in order to continue providing some return to clients.
With the recent decline in interest rates, the Company’s revenue from interest-earning assets such as securities held and loans
to clients has been declining more than the rates that the Company pays on funding sources such as customer deposits. The
Company’s ability to reduce those rates has been limited as short term rates have approached zero. If the current interest rate
environment persists through 2009, it will negatively impact net interest revenue on a year-over-year basis.
The level at which clients utilize margin loans will also impact net interest revenue. While the average balance of margin
loans was $10.3 billion for all of 2008, by month-end December the balance had declined to $6.2 billion.
The Company recorded pre-tax losses of $75 million related to two corporate debt securities in its securities available for sale
portfolio in 2008. Certain securities available for sale experienced deteriorating credit characteristics in 2008. Further
deterioration in the performance of these securities, including non-agency mortgage-backed securities, could result in the
recognition of future impairment charges.
RESULTS OF OPERATIONS
The following discussion presents an analysis of the Company’s results of operations for the years ended December 31, 2008,
2007, and 2006.
- 17 -
Net Revenues
revenue. Asset management and administration fees were relatively flat, while net interest revenue and trading revenue
increased in 2008 as compared to 2007. Asset management and administration fees, net interest revenue, and trading revenue
increased in 2007 as compared to 2006.
Year Ended December 31, 2008 2007 2006

% of % of % of
Growth Rate Total Net Total Net Total Net
2007-2008 Amount Revenues Amount Revenues Amount Revenues
Asset management and administration fees
Mutual fund service fees: (1)
Proprietary funds (Schwab Funds
and Laudus Funds) 8% $ 1,265 24% $ 1,167 23% $ 963 22%
Mutual Fund OneSource (12%) 544 11% 621 13% 526 12%
Clearing and other 4% 108 2% 104 2% 74 2%
Investment management and trust fees (10%) 340 7% 378 8% 310 7%
Other 11% 98 2% 88 1% 72 2%
Asset management and administration fees - 2,355 46% 2,358 47% 1,945 45%
Net interest revenue
Interest revenue (16%) 1,908 37% 2,270 46% 2,113 49%
Interest expense (61%) (243) (5%) (623) (13%) (679) (16%)
Net interest revenue 1% 1,665 32% 1,647 33% 1,434 33%
Trading revenue
Commissions 21% 915 18% 755 15% 703 16%
Principal transactions 57% 165 3% 105 2% 82 2%
Trading revenue 26% 1,080 21% 860 17% 785 18%
Other (61%) 50 1% 129 3% 145 4%
Total net revenues 3% $ 5,150 100% $ 4,994 100% $ 4,309 100%
(1)
Certain prior-year amounts have been reclassified to conform to the 2008 presentation.
Asset Management and Administration Fees
Asset management and administration fees include mutual fund service fees and fees for other asset-based financial services
provided to individual and institutional clients. The Company earns mutual fund service fees for transfer agent services,
shareholder services, administration, and investment management provided to its proprietary funds, and recordkeeping and
shareholder services provided to third-party funds. These fees are based upon the daily balances of client assets invested in
third-party funds and the Company’s proprietary funds. The Company also earns asset management fees for advisory and
managed account services, which are based on the daily balances of client assets subject to the specific fee for service. The
fair values of client assets, which include proprietary and third-party mutual funds, are based on quoted market prices and
other observable market data. Asset management and administration fees may vary with changes in the balances of client
assets due to market fluctuations and levels of net new client assets. For discussion of the impact of current market conditions
on asset management and administration fees, see “Current Market Environment”.
Asset management and administration fees remained relatively flat in 2008 from 2007, primarily due to lower third-party
mutual fund and advisory service fees, partially offset by higher proprietary fund fees. Mutual Fund OneSource service fees
decreased by $77 million, or 12%, in 2008 from 2007 primarily due to a 39% decline in Schwab’s Mutual Fund OneSource
asset balances. The Company’s proprietary mutual fund service fees increased $98 million, or 8%, in 2008 from 2007
primarily due to a 15% increase in money market mutual fund asset balances. Investment management and trust fees
decreased by $38 million, or 10%, in 2008 from 2007 due to lower balances of client assets participating in advisory and
managed account services programs.
Asset management and administration fees increased by $413 million, or 21%, in 2007 from 2006 primarily due to higher
mutual fund, advisory, and managed account asset balances. Mutual fund service fees increased $329 million, or 21% in 2007
- 18 -
from 2006 primarily due to a 26% rise in the Company’s proprietary mutual fund asset balances and an 11% increase in asset
balances in Schwab’s Mutual Fund OneSource service. Investment management and trust fees increased by $68 million, or
22%, in 2007 from 2006 primarily due to higher balances of client assets participating in advisory and managed account
services programs.
Net Interest Revenue
Net interest revenue is the difference between interest earned on interest-earning assets and interest paid on funding sources.
Net interest revenue is affected by changes in the volume and mix of these assets and liabilities, as well as by fluctuations in
interest rates and portfolio management strategies. The Company is positioned so that the consolidated balance sheet produces
an increase in net interest revenue when interest rates rise and, conversely, a decrease in net interest revenue when interest
rates fall (i.e., interest-earning assets generally reprice more quickly than interest-bearing liabilities). In the event of falling
interest rates, the Company might attempt to mitigate some of this negative impact by extending the maturities of assets in
investment portfolios to lock-in asset yields as well as by lowering rates paid to clients on interest-bearing liabilities. Since the
Company establishes the rates paid on certain brokerage client cash balances and deposits from banking clients, as well as the
rates charged on receivables from brokerage clients, and also controls the composition of its investment securities, it has some
ability to manage its net interest spread. However, the spread is influenced by external factors such as the interest rate
environment and competition. For discussion of the impact of current market conditions on net interest revenue, see “Current
Market Environment”.
In clearing its clients’ trades, Schwab holds cash balances payable to clients. In most cases, Schwab pays its clients interest on
cash balances awaiting investment, and may invest these funds and earn interest revenue. Receivables from brokerage clients
consist primarily of margin loans to brokerage clients. Margin loans are loans made by Schwab to clients on a secured basis to
purchase securities. Pursuant to SEC regulations, client cash balances that are not used for margin lending are generally
segregated into investment accounts that are maintained for the exclusive benefit of clients.
When investing segregated client cash balances, Schwab must adhere to SEC regulations that restrict investments to securities
guaranteed by the full faith and credit of the U.S. government, participation certificates, mortgage-backed securities
guaranteed by the Government National Mortgage Association, certificates of deposit issued by U.S. banks and thrifts, and
resale agreements collateralized by qualified securities. Additionally, Schwab has established policies for the minimum credit
quality and maximum maturity of these investments. Schwab Bank also maintains investment portfolios for liquidity as well
as to invest funding from deposits raised in excess of loans to banking clients. Schwab Bank’s securities available for sale
include mortgage-backed securities, corporate debt securities, certificates of deposit, asset-backed securities, and U.S. agency
notes. Schwab Bank’s securities held to maturity include asset-backed securities. Schwab Bank lends funds to banking clients
primarily in the form of mortgage loans. These loans are largely funded by interest-bearing deposits from banking clients.
The Company’s interest-earning assets are financed primarily by brokerage client cash balances and deposits from banking
clients. Other funding sources include noninterest-bearing brokerage client cash balances and proceeds from stock-lending
activities, as well as stockholders’ equity.
The amount of excess cash held in certain Schwab brokerage client accounts that is swept into money market deposit accounts
at Schwab Bank and (through May 2007) at U.S. Trust has increased significantly since the program’s inception in 2003.
Average interest-bearing banking deposits increased $7.2 billion, or 59%, to $19.2 billion in 2008 from 2007, and
$2.9 billion, or 32%, to $12.0 billion in 2007 from 2006. As a result, the average securities available for sale balances
increased $4.4 billion, or 60%, to $11.8 billion in 2008 from 2007, and $1.2 billion, or 20%, to $7.3 billion in 2007 from
2006, while the average balance of loans to banking clients increased $2.0 billion, or 73%, to $4.8 billion in 2008 from 2007,
and $629 million, or 29%, to $2.8 billion in 2007 from 2006.
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The following table presents net interest revenue information corresponding to interest-earning assets and funding sources on
the consolidated balance sheet:

Interest Average Interest Average Interest Average
Average Revenue/ Yield/ Average Revenue/ Yield/ Average Revenue/ Yield/
Balance Expense Rate Balance Expense Rate Balance Expense Rate
Interest-earning assets:
Cash and cash equivalents $ 5,217 $ 129 2.47% $ 4,290 $ 223 5.20% $ 2,450 $ 125 5.10%
Cash and investments segregated 11,223 280 2.49% 9,991 511 5.11% 12,758 602 4.72%
Broker-related receivables (1) 428 8 1.87% 595 27 4.54% 533 25 4.69%
Receivables from brokerage clients 10,278 612 5.95% 10,736 859 8.00% 10,252 837 8.16%
Securities available for sale (2) 11,772 517 4.39% 7,335 399 5.44% 6,125 319 5.21%
Securities held to maturity 22 1 5.86% - - - - - -
Loans to banking clients 4,831 227 4.70% 2,786 169 6.07% 2,157 128 5.93%
Total interest-earning assets 43,771 1,774 4.05% 35,733 2,188 6.12% 34,275 2,036 5.94%
Other interest revenue 134 82 77
Total interest-earning assets $ 43,771 $ 1,908 4.36% $ 35,733 $ 2,270 6.35% $ 34,275 $ 2,113 6.16%
Funding sources:
Deposits from banking clients $ 19,203 $ 104 0.54% $ 12,046 $ 238 1.98% $ 9,135 $ 200 2.19%
Payables to brokerage clients 15,220 55 0.36% 14,768 329 2.23% 17,865 426 2.38%
Short-term borrowings 40 1 2.54% - - - - - -
Long-term debt 890 59 6.63% 531 38 7.16% 419 29 6.92%
Total interest-bearing liabilities 35,353 219 0.62% 27,345 605 2.21% 27,419 655 2.39%
Non-interest bearing funding sources 8,418 8,388 6,856
Other interest expense 24 18 24
Total funding sources $ 43,771 $ 243 0.56% $ 35,733 $ 623 1.74% $ 34,275 $ 679 1.98%
Net interest revenue $ 1,665 3.80% $ 1,647 4.61% $ 1,434 4.18%
(1)
Includes receivables from brokers, dealers, and clearing organizations.
(2)
Amounts have been calculated based on amortized cost.
The increases in net interest revenue in the last two years were primarily due to higher average interest-earning assets,
including increases in securities available for sale, and loans to banking clients, partially offset by higher average balances on
deposits from banking clients. In addition, the increase in net interest revenue in 2008 was also partially offset by a decrease
in receivables from brokerage clients, as well as generally lower yields on interest-earning assets. Net interest revenue in 2007
included incremental interest revenue generated from temporarily investing the proceeds from the sale of U.S. Trust.
Consistent with declines in general market interest rates prevalent in 2008, the Company experienced declines in the yields of
all interest-earning assets during 2008 as compared to 2007 and 2006. Accordingly, the average interest rates on deposits
from banking clients and payables to brokerage clients also decreased during 2008 compared to 2007 and 2006. The decline
in the average interest rate on long-term debt was due to the additional debt issued at lower interest rates as part of the
Company’s capital restructuring in 2007.
Certain interest-bearing assets and liabilities of U.S. Trust retained by the Company in 2007 and 2006: The excess cash held
in certain Schwab brokerage client accounts was previously swept into a money market deposit account at U.S. Trust. In
May 2007, Schwab terminated this arrangement and moved all of these balances to a similar existing arrangement with
Schwab Bank. The interest expense related to these client deposit balances maintained at U.S. Trust is included in interest
expense from continuing operations on the Company's consolidated statements of income for 2007 and 2006. The interest
expense was $4 million and $11 million for 2007 and 2006, respectively. The corresponding interest revenue on the invested
cash balances related to these deposits is included in interest revenue from continuing operations on the Company's
consolidated statements of income for 2007 and 2006. The interest revenue was $14 million and $38 million for 2007 and
2006, respectively. The interest revenue amount was calculated using the Company’s funds transfer pricing methodology.
Trading Revenue
Trading revenue includes commission and principal transaction revenues. Commission revenues are affected by the number of
revenue trades executed and the average revenue earned per revenue trade. Principal transaction revenues are primarily
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comprised of revenues from client fixed income securities trading activity. Factors that influence principal transaction
revenues include the volume of client trades, market price volatility, and competitive pressures.
Trading revenue increased by $220 million, or 26%, in 2008 from 2007 and $75 million, or 10%, in 2007 from 2006 due to
higher daily average revenue trades and higher average revenue earned per revenue trade.
As shown in the following table, daily average revenue trades executed by the Company increased 19% in 2008. The increase
in daily average revenue trades was due to higher volumes of equity, mutual fund, option, and principal transaction trades.
Average revenue earned per revenue trade increased 4% in 2008 from 2007 primarily due to higher average revenue earned
per revenue trade for fixed income securities, partially offset by lower average revenue earned per revenue trade for option
securities. Average revenue earned per revenue trade increased 4% in 2007 from 2006 primarily due to a higher proportion of
equity trading volume outside the Company’s active investor programs.
Growth Rate
2007-2008 2008 2007 2006
(1)
Daily average revenue trades (in thousands) 19% 292.6 245.3 234.4
Number of trading days 1% 251.5 249.5 250.0
Average revenue earned per revenue trade 4% $ 14.53 $ 13.99 $ 13.39
(1)
Includes all client trades that generate trading revenue (i.e., commission revenue or revenue from fixed income securities
trading).
Other Revenue
Other revenue includes realized gains and losses on sales of securities available for sale, service fees, and software
maintenance fees. Other revenue decreased by $79 million, or 61%, in 2008 from 2007 primarily due to losses of $75 million
related to two corporate debt securities in the Company’s securities available for sale portfolio in 2008. On September 15,
2008, Lehman Brothers Holdings, Inc. (Lehman) filed a Chapter 11 bankruptcy petition and on September 25, 2008, the
Federal Deposit Insurance Corporation (FDIC) seized Washington Mutual Bank. As a result of these events, the Company
sold these debt securities in 2008.
Expenses Excluding Interest
As shown in the table below, expenses excluding interest were relatively flat in 2008 as compared to 2007 primarily due to a
decrease in compensation and benefits expense, partially offset by increases in other expense and occupancy and equipment
expense. Expenses excluding interest increased in 2007 as compared to 2006 primarily due to higher compensation and
benefits expense, advertising and market development expense, and professional services expense.
Growth Rate
2007-2008 2008 2007 2006
Compensation and benefits (6%) $ 1,667 $ 1,781 $ 1,619
Professional services 3% 334 324 285
Occupancy and equipment 6% 299 282 260
Advertising and market development 6% 243 230 189
Communications 6% 211 200 180
Depreciation and amortization (3%) 152 156 157
Other 29% 216 168 143
Total expenses excluding interest (1%) $ 3,122 $ 3,141 $ 2,833
Expenses as a percentage of total net revenues:
Total expenses excluding interest 61% 63% 66%
Advertising and market development 5% 5% 4%
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Compensation and Benefits
Compensation and benefits expense includes salaries and wages, incentive compensation, and related employee benefits and
taxes. Incentive compensation is based on the achievement of specified performance objectives, including revenue growth,
profit margin, and EPS, and therefore will fluctuate with these measures.
Compensation and benefits expense decreased by $114 million, or 6%, in 2008 from 2007 due to decreases in incentive
compensation and employee benefits and other expense, offset by an increase in salaries and wages. Compensation and
benefits expense increased by $162 million, or 10%, in 2007 from 2006 due to increases in salaries and wages, incentive
compensation, and employee benefits and other expense. The following table shows a comparison of certain compensation
and benefits components and employee data:
Growth Rate
2007-2008 2008 2007 2006
Salaries and wages 7% $ 1,020 $ 955 $ 872
Incentive compensation (1) (27%) 402 552 504
Employee benefits and other (11%) 245 274 243
Total compensation and benefits expense (6%) $ 1,667 $ 1,781 $ 1,619
Compensation and benefits expense as a percentage of total net revenues:
Salaries and wages 20% 19% 20%
Incentive compensation 8% 11% 12%
Employee benefits and other 4% 6% 6%
Total compensation and benefits expense 32% 36% 38%
Full-time equivalent employees (in thousands) (2)
At year end 1% 13.4 13.3 12.4
Average 5% 13.5 12.9 11.9
(1)
Includes incentives, discretionary bonus costs, long-term incentive plan, stock-based compensation, and employee stock
purchase plan expense.
(2)
Includes full-time, part-time and temporary employees, and persons employed on a contract basis, and excludes
employees of outsourced service providers.
Salaries and wages increased in 2008 from 2007 due to higher severance expense. Incentive compensation decreased in 2008
from 2007 primarily due to lower long-term incentive plan compensation, discretionary bonus costs, and variable
compensation. Discretionary bonus costs and variable compensation decreased in 2008 from 2007 based on actual
performance in 2008. Long-term incentive plan compensation decreased in 2008 from 2007 primarily due to the maturity of
certain plan units that matured in 2007. Employee benefits and other expense decreased in 2008 from 2007 primarily due to a
decrease in deferred compensation.
Salaries and wages and employee benefit and other expense increased in 2007 from 2006 due to an increase in full-time
employees. Incentive compensation increased in 2007 from 2006 primarily due to the increased cost of performance-based
incentive plans as a result of the Company’s improved financial results in 2007 and stock-based compensation.
Expenses Excluding Compensation and Benefits
Occupancy and equipment expense increased in 2008 from 2007 primarily due to increases in data processing equipment and
maintenance expense of $12 million and occupancy expense of $5 million. Advertising and market development expense
increased in 2008 from 2007 due to an increase in media spending related to the Company’s “Talk to Chuck™” national
advertising campaign. Communications expense increased in 2008 from 2007 primarily due to higher levels of postage and
printing costs of $8 million. Other expense increased in 2008 from 2007 primarily due to charges of $29 million for individual
client complaints and arbitration claims relating to Schwab YieldPlus Fund investments.
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Professional services expense increased in 2007 from 2006 primarily due to higher levels of fees paid to outsourced service
providers and consultants. Occupancy and equipment expense increased in 2007 from 2006 due to increases in data
processing equipment and maintenance expense of $17 million and occupancy expense of $5 million. Advertising and market
development expense increased in 2007 from 2006 primarily due to the Company’s media and marketing spending related to
its “Talk to Chuck™” national advertising campaign. Communications expense increased in 2007 from 2006 due to higher
levels of postage and printing costs of $15 million and news and quotes services of $5 million. Other expense increased in
2007 from 2006 primarily due to increases in regulatory fees of $7 million, bank service charges of $7 million, and charitable
contributions of $4 million.
Taxes on Income
The Company’s effective income tax rate on income from continuing operations was 39.3% in 2008 and 39.6% in both 2007
and 2006.
Segment Information
The Company provides financial services to individuals, and institutional and corporate clients through three segments –
Investor Services (formerly called Schwab Investor Services), Advisor Services (formerly called Schwab Institutional), and
Corporate and Retirement Services (formerly called Schwab Corporate and Retirement Services). The Investor Services
segment includes the Company’s retail brokerage and banking operations. The Advisor Services segment provides custodial,
trading, and support services to independent investment advisors. The Corporate and Retirement Services segment provides
retirement plan services, plan administrator services, stock plan services, and mutual fund clearing services and supports the
availability of Schwab proprietary mutual funds on third-party platforms. The Company evaluates the performance of its
segments on a pre-tax basis excluding items such as restructuring charges, impairment charges on non-financial assets,
discontinued operations, and extraordinary items. Segment assets are not disclosed because the balances are not used for
evaluating segment performance and deciding how to allocate resources to segments.
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Financial information for the Company’s reportable segments is presented in the following table:
Growth Rate
For the year ended December 31, 2007-2008 2008 2007 2006
Investor Services:
Net revenues 1% $ 3,385 $ 3,352 $ 2,940
Expenses excluding interest - (2,107) (2,115) (1,982)
Contribution margin 3% $ 1,278 $ 1,237 $ 958
Advisor Services:
Net revenues 12% $ 1,250 $ 1,121 $ 966
Expenses excluding interest (4%) (612) (639) (562)
Contribution margin 32% $ 638 $ 482 $ 404
Corporate and Retirement Services:
Net revenues - $ 504 $ 506 $ 373
Expenses excluding interest 6% (389) (367) (268)
Contribution margin (17%) $ 115 $ 139 $ 105
Unallocated and other:
Net revenues N/M $ 11 $ 15 $ 30
Expenses excluding interest N/M (14) (20) (21)
Contribution margin N/M $ (3) $ (5) $ 9
Total:
Net revenues 3% $ 5,150 $ 4,994 $ 4,309
Expenses excluding interest (1%) (3,122) (3,141) (2,833)
Contribution margin 9% $ 2,028 $ 1,853 $ 1,476
N/M Not meaningful.
Investor Services
Net revenues increased in 2008 by $33 million, or 1%, from 2007 primarily due to increases in trading revenue and net
interest revenue, partially offset by the decrease in other revenue. Trading revenue increased due to higher daily average
revenue trades. Net interest revenue increased due to higher levels of interest-earning assets, partially offset by the impact of a
decrease in the average net yield earned on these assets. The decrease in other revenue was primarily due to losses on
investments in the Company’s securities available for sale portfolio. Expenses excluding interest were relatively flat in 2008
as compared to 2007 as a result of lower incentive compensation expense, offset by a charge for individual client complaints
and arbitration claims related to Schwab YieldPlus Fund investments in 2008.
Net revenues increased in 2007 by $412 million, or 14%, from 2006 due to increases in net interest revenue and asset
management and administration fees. Net interest revenue increased due to higher levels of market interest rates and changes
in the composition of interest-earning assets, including increases in securities available for sale and loans to banking clients.
Asset management and administration fees increased as a result of higher balances of client assets in the Company’s
proprietary mutual funds and Mutual Fund OneSource service, as well as balances participating in advisory and managed
account service programs. Expenses excluding interest increased in 2007 by $133 million, or 7%, from 2006 primarily due to
higher client servicing and other related expenses, as well as higher market development expense.
Advisor Services
Net revenues increased in 2008 by $129 million, or 12%, from 2007 due to increases in trading revenue and asset
management and administration fees, offset by the decrease in net interest revenue. Trading revenue increased due to higher
daily average revenue trades. Asset management and administration fees increased as a result of higher balances of client
assets in the Company’s proprietary funds. Net interest revenue decreased due to the impact of a decrease in the average net
yield earned on interest-earning assets. Expenses excluding interest decreased in 2008 by $27 million, or 4%, from 2007
primarily due to lower incentive compensation expense.
- 24 -
Net revenues increased in 2007 by $155 million, or 16%, from 2006 due to increases in asset management and administration
fees and net interest revenue. Asset management and administration fees increased as a result of higher balances of client
assets in the Company’s proprietary mutual funds and Mutual Fund OneSource service, as well as balances participating in
managed account service programs. Net interest revenue increased due to higher levels of market interest rates and changes in
the composition of interest-earning assets, including increases in securities available for sale. Expenses excluding interest
increased in 2007 by $77 million, or 14%, from 2006 primarily due to higher business development, marketing and account
servicing related expenses, as well as increased infrastructure investment.
Corporate and Retirement Services

Net revenues were flat in 2008 as compared to 2007 as a result of an increase in trading revenue offset by a decrease in net
interest revenue. Trading revenue increased due to higher daily average revenue trades. Net interest revenue decreased due to
the impact of a decrease in the average net yield earned on interest-earning assets. Expenses excluding interest increased in
2008 by $22 million, or 6%, from 2007 due to increased costs to service additional corporate retirement plan participants
resulting from the acquisition of the 401(k) Company, offset by lower incentive compensation expense.
Net revenues increased in 2007 by $133 million, or 36%, from 2006 due to increases in asset management and administration
fees and net interest revenue, as well as the acquisition of the 401(k) Company in March 2007. Asset management and
administration fees increased as a result of higher balances of client assets in the Company’s mutual funds and advisory and
managed account service programs. Net interest revenue increased due to higher levels of market interest rates and changes in
the composition of interest-earning assets. Expenses excluding interest increased in 2007 by $99 million, or 37%, from 2006
primarily due to costs to service additional corporate retirement plan participants as a result of the acquisition of the 401(k)
Company.
Capital Restructuring
In 2007, CSC completed a capital restructuring that returned approximately $3.3 billion in capital to stockholders to create a
more efficient and cost-effective capital structure. The capital restructuring included the following components:
 CSC paid a special cash dividend of $1.00 per common share, which returned $1.2 billion to stockholders. The
special dividend was paid on August 24, 2007, to stockholders of record on July 24, 2007.
 CSC repurchased 84 million shares of its common stock through a modified “Dutch Auction” tender offer in August
2007. The tender offer period closed on July 31, 2007, and CSC accepted for purchase 84 million shares of its
common stock, at a purchase price of $20.50 per share, for a total purchase price of $1.7 billion.
 CSC executed a separate Stock Purchase Agreement with Chairman and former CEO Charles R. Schwab, CSC’s
largest stockholder, and with certain additional stockholders whose shares Mr. Schwab was deemed to beneficially
own. Under the Stock Purchase Agreement, Mr. Schwab and the other stockholders who are parties to the agreement
did not participate in the tender offer, but instead, sold, and CSC purchased, 18 million shares, at a purchase price
($20.50 per share), which is the same as was determined and paid in the tender offer, for a total purchase price of
$369 million. The number of shares repurchased resulted in Mr. Schwab maintaining the same beneficial percentage
interest in CSC’s outstanding common stock that he had prior to the tender offer and sale of shares pursuant to the
Stock Purchase Agreement (approximately 18 percent, which does not take into consideration Mr. Schwab’s
outstanding options to acquire stock). The shares under this agreement were repurchased on August 15, 2007.
 CSC issued $250 million of 6.375% Senior Medium-Term Notes due in 2017 in September 2007 and $300 million of
junior subordinated notes in October 2007. For further discussion of the issuance of the junior subordinated notes,
see “Item 8 – Financial Statements and Supplementary Data – Notes to Consolidated Financial Statements – 12.
Borrowings.”
Discontinued Operations
On July 1, 2007, the Company completed the sale of all of the outstanding common stock of U.S. Trust for $3.3 billion in
cash. CSC recognized a gain on the sale of $1.9 billion, or $1.2 billion after tax, in third quarter of 2007. In connection with
the determination of the final income tax gain on the sale of U.S. Trust, the Company recorded additional tax expense of
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$18 million in the second quarter of 2008. U.S. Trust is presented as a discontinued operation for all periods prior to the
completion of the sale.
Business Acquisition
On March 31, 2007, the Company completed its acquisition of The 401(k) Company, which offers retirement plan services,
for $115 million in cash. As a result of a purchase price allocation, the Company recorded goodwill of $106 million and
intangible assets of $8 million. The intangible assets are being amortized over 16 years.
LIQUIDITY AND CAPITAL RESOURCES
CSC conducts substantially all of its business through its wholly-owned subsidiaries. The capital structure among CSC and its
subsidiaries is designed to provide each entity with capital and liquidity to meet its operational needs and regulatory
requirements.
CSC is a savings and loan holding company and Schwab Bank, CSC’s depository institution, is a federal savings bank. CSC
and Schwab Bank are both subject to supervision and regulation by the Office of Thrift Supervision.
Liquidity
CSC
As a savings and loan holding company, CSC is not subject to specific statutory capital requirements. However, CSC is
required to maintain capital that is sufficient to support the holding company and its subsidiaries’ business activities, and the
risks inherent in those activities. To manage capital adequacy, CSC currently utilizes a target Tier 1 Leverage Ratio, as
defined by the Board of Governors of the Federal Reserve Board, of at least 6%. At December 31, 2008, CSC’s Tier 1
Leverage Ratio was 8.6%.
CSC’s liquidity needs are generally met through cash generated by its subsidiaries, as well as cash provided by external
financing. CSC maintains excess liquidity in the form of overnight cash deposits to cover daily funding needs and to support
growth in the Company’s business. Generally, CSC does not hold liquidity at its subsidiaries in excess of amounts deemed
sufficient to support the subsidiaries’ operations, including any regulatory capital requirements. Schwab and Schwab Bank are
subject to regulatory requirements that may restrict them from certain transactions with CSC. Management believes that funds
generated by the operations of CSC’s subsidiaries will continue to be the primary funding source in meeting CSC’s liquidity
needs, providing adequate liquidity to meet Schwab Bank’s capital guidelines, and maintaining Schwab’s net capital.
CSC has liquidity needs that arise from its Senior Medium-Term Notes, Series A (Medium-Term Notes), and junior
subordinated notes, as well as from the funding of cash dividends, acquisitions, and other investments. The Medium-Term
Notes, of which $458 million was outstanding at December 31, 2008, have maturities ranging from 2009 to 2017 and fixed
interest rates ranging from 6.375% to 8.05% with interest payable semiannually. The Medium-Term Notes are rated A2 by
Moody’s Investors Service (Moody’s), A by Standard & Poor’s Ratings Group (S&P), and A by Fitch IBCA, Inc. (Fitch). At
December 31, 2008, $300 million of junior subordinated notes were outstanding and have a fixed interest rate of 7.50% until
2017 and a floating rate thereafter. The junior subordinated notes are not rated, however the trust preferred securities related
to these notes are rated A3 by Moody’s, BBB+ by S&P, and A- by Fitch. For further discussion of the issuance of the junior
subordinated notes, see “Item 8 – Financial Statements and Supplementary Data – Notes to Consolidated Financial Statements
– 12. Borrowings.”
CSC has a universal automatic shelf registration statement on file with the SEC which enables CSC to issue debt, equity and
other securities. This registration statement was filed in December 2008. CSC’s prior shelf registration statement/prospectus
supplement for issuing Medium-Term Notes and universal shelf registration statement both expired in November 2008.
- 26 -
CSC has authorization from its Board of Directors to issue unsecured commercial paper notes (Commercial Paper Notes) not
to exceed $1.5 billion. Management has set a current limit for the commercial paper program of $800 million. The maturities
of the Commercial Paper Notes may vary, but are not to exceed 270 days from the date of issue. The commercial paper is not
redeemable prior to maturity and is not subject to voluntary prepayment. The proceeds of the commercial paper program are
to be used for general corporate purposes. CSC commenced issuing Commercial Paper Notes in April 2008. Average
borrowings for the year ended December 31, 2008 were $40 million. There were no Commercial Paper Notes outstanding at
December 31, 2008. CSC’s ratings for these short-term borrowings are P-1 by Moody’s, A-1 by S&P, and F1 by Fitch.
CSC maintains an $800 million committed, unsecured credit facility with a group of fourteen banks which is scheduled to
expire in June 2009. CSC plans to establish a similar facility to replace this one when it expires. This facility was unused in
2008. Any issuances under CSC’s commercial paper program will reduce the amount available under this facility. The funds
under this facility are available for general corporate purposes, including repayment of the Commercial Paper Notes discussed
above. The financial covenants under this facility require Schwab to maintain a minimum net capital ratio, as defined, Schwab
Bank to be well capitalized, as defined, and CSC to maintain a minimum level of stockholders’ equity. At December 31,
2008, the minimum level of stockholders’ equity required under this facility was $2.6 billion. Management believes that these
restrictions will not have a material effect on its ability to meet foreseeable dividend or funding requirements.
CSC also has direct access to $1.0 billion of the $1.1 billion uncommitted, unsecured bank credit lines discussed below, that
are primarily utilized by Schwab to manage short-term liquidity. The amount available to CSC under these lines is lower than
the amount available to Schwab because the credit line provided by one of these banks is only available to Schwab. These
lines were not used by CSC in 2008.
In addition, Schwab provides CSC with a $1.0 billion credit facility maturing in 2009. No funds were drawn under this
facility at December 31, 2008.
Schwab
Schwab is subject to regulatory requirements that are intended to ensure the general financial soundness and liquidity of
broker-dealers. These regulations prohibit Schwab from repaying subordinated borrowings to CSC, paying cash dividends, or
making unsecured advances or loans to its parent or employees if such payment would result in net capital of less than 5% of
aggregate debit balances or less than 120% of its minimum dollar requirement of $250,000. At December 31, 2008, Schwab’s
net capital was $1.2 billion (16% of aggregate debit balances), which was $1.1 billion in excess of its minimum required net
capital and $840 million in excess of 5% of aggregate debit balances.
Most of Schwab’s assets are readily convertible to cash, consisting primarily of short-term (i.e., less than 150 days)
investment-grade, interest-earning investments (the majority of which are segregated for the exclusive benefit of clients
pursuant to regulatory requirements), receivables from brokerage clients, and receivables from brokers, dealers, and clearing
organizations. Client margin loans are demand loan obligations secured by readily marketable securities. Receivables from
and payables to brokers, dealers, and clearing organizations primarily represent current open transactions, which usually
settle, or can be closed out, within a few business days.
Liquidity needs relating to client trading and margin borrowing activities are met primarily through cash balances in
brokerage client accounts, which were $19.2 billion, $19.5 billion, and $19.9 billion at December 31, 2008, 2007, and 2006,
respectively. Management believes that brokerage client cash balances and operating earnings will continue to be the primary
sources of liquidity for Schwab in the future.
The Company has a finance lease obligation related to an office building and land under a 20-year lease. The remaining
finance lease obligation of $116 million at December 31, 2008 is being reduced by a portion of the lease payments over the
remaining lease term of approximately 16 years.
To manage short-term liquidity, Schwab maintains uncommitted, unsecured bank credit lines with a group of six banks
totaling $1.1 billion at December 31, 2008. The need for short-term borrowings arises primarily from timing differences
- 27 -
between cash flow requirements, scheduled liquidation of interest-bearing investments, and movements of cash to meet
segregation requirements. Schwab used such borrowings for eighteen days in 2008, with daily amounts borrowed averaging
$117 million. There were no borrowings outstanding under these lines at December 31, 2008.
To satisfy the margin requirement of client option transactions with the Options Clearing Corporation (OCC), Schwab has
unsecured standby letter of credit (LOCs) agreements with seven banks in favor of the OCC aggregating $550 million at
December 31, 2008. In connection with its securities lending activities, Schwab is required to provide collateral to certain
brokerage clients. Schwab satisfies the collateral requirements by arranging LOCs, in favor of these brokerage clients, which
are issued by multiple banks. At December 31, 2008, the aggregate face amount of these LOCs totaled $100 million. No funds
were drawn under any of these LOCs during 2008.
To manage Schwab’s regulatory capital requirement, CSC provides Schwab with a $1.4 billion subordinated revolving credit
facility which is scheduled to expire in March 2010. The amount outstanding under this facility at December 31, 2008 was
$220 million. Borrowings under this subordinated lending arrangement qualify as regulatory capital for Schwab.
In addition, CSC provides Schwab with a $1.5 billion credit facility which is scheduled to expire in 2011. Borrowings under
this facility do not qualify as regulatory capital for Schwab. At December 31, 2008, $153 million was outstanding under this
facility, which was subsequently repaid on January 2, 2009.
Schwab Bank
Schwab Bank is required to maintain a capital level that at least equals minimum capital levels specified in federal banking
laws and regulations. Failure to meet the minimum levels will result in certain mandatory, and possibly additional
discretionary, actions by the regulators that, if undertaken, could have a direct effect on Schwab Bank. Based on its regulatory
capital ratios at December 31, 2008, Schwab Bank is considered well capitalized. Schwab Bank’s regulatory capital and ratios
are as follows:
Minimum Capital Minimum to be

Actual Requirement Well Capitalized
December 31, 2008 Amount Ratio Amount Ratio Amount Ratio
Tier 1 Capital $ 1,650 15.3% $ 432 4.0% $ 647 6.0%
Total Capital $ 1,671 15.5% $ 863 8.0% $ 1,079 10.0%
Leverage $ 1,650 6.4% $ 1,037 4.0% $ 1,296 5.0%
Tangible Equity $ 1,650 6.4% $ 518 2.0% N/A
N/A Not applicable.
Schwab Bank's current liquidity needs are generally met through deposits from banking clients and equity capital.
The excess cash held in certain Schwab brokerage client accounts is swept into a money market deposit account at Schwab
Bank. At December 31, 2008, these balances totaled $18.4 billion.
Additionally, Schwab Bank has access to traditional funding sources such as deposits, federal funds purchased, and
repurchase agreements. Schwab Bank has access to short-term funding through the Federal Reserve Bank (FRB) discount
window. Amounts available under the FRB discount window are dependent on the amount of Schwab Bank’s mortgage-
backed securities available for sale that are pledged as collateral. At December 31, 2008, $187 million was available under
this arrangement. There were no funds drawn under this arrangement during 2008.
Schwab Bank maintains a credit facility with the Federal Home Loan Bank System (FHLB). Amounts available under this
facility are dependent on the amount of Schwab Bank’s home equity lines of credit that are pledged as collateral. At
December 31, 2008, $415 million was available under this facility. There were no funds drawn under this facility during
2008.
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CSC provides Schwab Bank with a $100 million short-term credit facility which is scheduled to expire in December 2009.
Borrowings under this facility do not qualify as regulatory capital for Schwab Bank. No funds were drawn under this facility
during 2008.
Capital Resources
The Company monitors both the relative composition and absolute level of its capital structure. Management is focused on
limiting the Company's use of capital and currently targets a long-term debt to total financial capital ratio of less than 30%.
The Company’s total financial capital (long-term debt plus stockholders’ equity) at December 31, 2008 was $4.9 billion, up
$313 million, or 7%, from December 31, 2007.
At December 31, 2008, the Company had long-term debt of $883 million, or 18% of total financial capital, that bears interest
at a weighted-average rate of 7.03%. At December 31, 2007, the Company had long-term debt of $899 million, or 19% of
total financial capital. The Company repaid $20 million and $43 million of long-term debt in 2008 and 2007, respectively.
The Company’s cash position (reported as cash and cash equivalents on the Company’s consolidated balance sheet) and cash
flows are affected by changes in brokerage client cash balances and the associated amounts required to be segregated under
regulatory guidelines. Timing differences between cash and investments actually segregated on a given date and the amount
required to be segregated for that date may arise in the ordinary course of business and are addressed by the Company in
accordance with applicable regulations. Other factors which affect the Company’s cash position and cash flows include
investment activity in securities, levels of capital expenditures, acquisition and divestiture activity, banking client deposit
activity, brokerage and banking client loan activity, financing activity in long-term debt, payments of dividends, and
repurchases of CSC’s common stock. The combination of these factors can cause significant fluctuations in the levels of cash
and cash equivalents during specific time periods.
Capital Expenditures
The Company’s capital expenditures were $196 million in 2008 and $168 million in 2007. Capital expenditures as a
percentage of net revenues were 4% and 3% in 2008 and 2007, respectively. Capital expenditures in 2008 included software
and equipment relating to the Company’s information technology systems, buildings, and leasehold improvements. Capital
expenditures in 2007 were primarily for software and equipment relating to the Company's information technology systems.
Capital expenditures include capitalized costs for developing internal-use software of $46 million in 2008 and $57 million in
2007.
Management currently anticipates that 2009 capital expenditures will be approximately 25% lower than 2008 spending,
primarily due to decreased spending on software relating to the Company’s information technology systems, as well as
decreased spending on buildings. As has been the case in recent years, the Company may adjust its capital expenditures from
period to period as business conditions change. Management believes that funds generated by its operations will continue to
be the primary funding source of its capital expenditures.
Dividends
CSC paid common stock cash dividends of $253 million in 2008. CSC paid common stock cash dividends of $1.5 billion in
2007, which included a special cash dividend of $1.2 billion. Since the initial dividend in 1989, CSC has paid 79 consecutive
quarterly dividends and has increased the quarterly dividend 19 times, including a 20% increase in the third quarter of 2008.
Since 1989, dividends have increased by a 28% compounded annual growth rate, excluding the special cash dividend of $1.00
per common share in 2007. CSC paid common stock dividends of $.220, $1.200, and $.135 per share in 2008, 2007, and
2006, respectively. While the payment and amount of dividends are at the discretion of the Board, subject to certain
regulatory and other restrictions, the Company currently targets its cash dividend at approximately 20% to 30% of net income.
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Share Repurchases
CSC repurchased 17 million shares of its common stock for $350 million in 2008. CSC repurchased 135 million shares of its
common stock, including shares repurchased under the tender offer and the Stock Purchase Agreement described below for
$2.7 billion in 2007. As of December 31, 2008, CSC had remaining authority from the Board of Directors to repurchase up to
$596 million of its common stock.
On July 31, 2007, CSC completed a share repurchase through a tender offer. CSC accepted for purchase 84 million shares of
its common stock at a price of $20.50 per share, for a total purchase price of $1.7 billion. Pursuant to the tender offer rules,
CSC was prohibited from making open market repurchases of its common stock during the tender offer period and until
August 15, 2007.
Under the Stock Purchase Agreement executed on July 2, 2007 with Chairman and former CEO Charles R. Schwab, CSC’s
largest stockholder, and with certain additional stockholders whose shares Mr. Schwab is deemed to beneficially own, CSC
purchased 18 million shares at a price of $20.50 per share for a total of $369 million on August 15, 2007.
Acquisition and Divestiture
On July 1, 2007, the Company completed the sale of U.S. Trust and received proceeds of $3.3 billion. On March 31, 2007, the
Company completed its acquisition of The 401(k) Company for $115 million in cash.
Off-Balance-Sheet Arrangements
The Company enters into various off-balance-sheet arrangements in the ordinary course of business, primarily to meet the
needs of its clients. These arrangements include firm commitments to extend credit. Additionally, the Company enters into
guarantees and other similar arrangements as part of transactions in the ordinary course of business. For information on each
of these arrangements, see “Item 8 – Financial Statements and Supplementary Data – Notes to Consolidated Financial
Statements – 13. Commitments and Contingent Liabilities.”
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Contractual Obligations
A summary of the Company’s principal contractual obligations as of December 31, 2008, is shown in the following table.
Excluded from this table are liabilities recorded on the consolidated balance sheet that are generally short-term in nature (e.g.,
drafts payable) or without contractual payment terms (e.g., deposits from banking clients, payables to brokerage clients, and
deferred compensation). Management believes that funds generated by its continuing operations, as well as cash provided by
external financing, will continue to be the primary funding sources in meeting these obligations.
Less than 1-3 3-5 More than

1 Year Years Years 5 Years Total
(1)
Credit-related financial instruments $ 711 $ 8 $ 352 $ 3,885 $ 4,956
Long-term debt (2) 63 285 77 705 1,130
Leases (3) 129 234 125 237 725
Purchase obligations (4) 214 106 3 - 323
Long-term incentive plan 90 - - - 90
Total $ 1,207 $ 633 $ 557 $ 4,827 $ 7,224
(1)
Represents Schwab Bank’s firm commitments to extend credit to banking clients.
(2)
Includes estimated future interest payments through 2017. The junior subordinated notes have a fixed interest rate of
7.50% until 2017 and a floating rate from 2018 to 2067. Based on the current interest rate of 7.50% and no repayments of
principal, the estimated future interest payments on the junior subordinated notes in 2018 to 2067 would be $22 million
per year. Amounts exclude maturities under a finance lease obligation, unamortized discounts, and the effect of interest
rate swaps.
(3)
Represents minimum rental commitments, net of sublease commitments, and includes facilities under the Company’s past
restructuring initiatives and rental commitments under a finance lease obligation.
(4)
Consists of purchase obligations for services such as advertising and marketing, telecommunications, professional
services, and hardware- and software-related agreements. Includes purchase obligations which can be canceled by the
Company without penalty.
RISK MANAGEMENT
Overview
The Company’s business activities expose it to a variety of risks including technology and operations risk, credit, market and
liquidity risks, and legal and reputational risk. Identification and management of these risks are essential to the success and
financial soundness of the Company.
Senior management takes an active role in the Company’s risk management process and has developed policies and
procedures under which specific business and control units are responsible for identifying, measuring, and controlling various
risks. Oversight of risk management has been delegated to the Global Risk Committee, which is comprised of senior
managers of major business and control functions. The Global Risk Committee is responsible for reviewing and monitoring
the Company’s risk exposures, and leading the continued development of the Company’s risk management policies and
practices.
Functional risk sub-committees focusing on specific areas of risk report into the Global Risk Committee. These sub-
committees include:
 Corporate Asset-Liability Management and Pricing Committee, which focuses on the Company’s liquidity, capital
resources, interest rate risk, and investments;
 Credit and Market Risk Oversight Committee, which focuses on the credit exposures resulting from client activity
(e.g., margin lending activities and loans to banking clients), the investing activities of certain of the Company’s
proprietary funds, corporate credit activities (e.g., counterparty and corporate investing activities), and market risk
resulting from the Company taking positions in certain securities to facilitate client trading activity;
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 Technology and Operations Risk Committee, which focuses on the integrity of controls and operating capacity of the
Company’s systems and operations processes;
 Fiduciary Risk Committee, which oversees activities of the Company with a fiduciary component;
 New Products Committee, which addresses risks associated with new products and services; and
 Information Security and Privacy Steering Committee, which oversees information security and privacy programs
and policies.
The Global Risk Committee reports regularly to the Audit Committee of the Board of Directors (Audit Committee), which
reviews major risk exposures and the steps management has taken to monitor and control such exposures.
The Company’s Disclosure Committee is responsible for the monitoring and evaluation of the effectiveness of the Company’s
(a) disclosure controls and procedures and (b) internal control over financial reporting as of the end of each fiscal quarter. The
Disclosure Committee reports on this evaluation to the CEO and CFO prior to their certification required by Sections 302 and
906 of the Sarbanes Oxley Act of 2002.
Additionally, the Company’s compliance, finance, internal audit, legal, and risk and credit management departments assist
management and the various risk committees in evaluating, testing, and monitoring the Company’s risk management.
Risk is inherent in the Company’s business. Consequently, despite the Company’s efforts to identify areas of risk, oversee
operational areas involving risk, and implement policies and procedures designed to manage risk, there can be no assurance
that the Company will not suffer unexpected losses due to operating or other risks. The following discussion highlights the
Company’s policies and procedures for identification, assessment, and management of the principal areas of risk in its
operations.
Technology and Operating Risk
Technology and operating risk is the potential for loss due to deficiencies in control processes or technology systems that
constrain the Company’s ability to gather, process and communicate information and process client transactions efficiently
and securely, without interruptions. The Company’s operations are highly dependent on the integrity of its technology
systems and the Company’s success depends, in part, on its ability to make timely enhancements and additions to its
technology in anticipation of evolving client needs. To the extent the Company experiences system interruptions, errors or
downtime (which could result from a variety of causes, including changes in client use patterns, technological failure, changes
to its systems, linkages with third-party systems, and power failures), the Company’s business and operations could be
significantly negatively impacted. Additionally, rapid increases in client demand may strain the Company’s ability to enhance
its technology and expand its operating capacity. To minimize business interruptions, Schwab has two data centers intended,
in part, to further improve the recovery of business processing in the event of an emergency. The Company is committed to an
ongoing process of upgrading, enhancing, and testing its technology systems. This effort is focused on meeting client needs,
meeting market and regulatory changes, and deploying standardized technology platforms.
Technology and operating risk also includes the risk of human error, employee misconduct, external fraud, computer viruses,
terrorist attack, and natural disaster. Employee misconduct could include fraud and misappropriation of client or Company
assets, improper use or disclosure of confidential client or Company information, and unauthorized activities, such as
transactions exceeding acceptable risks or authorized limits. External fraud includes misappropriation of client or Company
assets by third parties, including through unauthorized access to Company systems and data and client accounts. The
frequency and sophistication of such fraud attempts continue to increase.
The Company has specific policies and procedures to identify and manage operational risk, and uses periodic risk self-
assessments and internal audit reviews to evaluate the effectiveness of these internal controls. The Company maintains backup
and recovery functions, including facilities for backup and communications, and conducts periodic testing of disaster recovery
plans. The Company also maintains policies and procedures and technology to protect against fraud and unauthorized access
to systems and data.
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Despite the Company’s risk management efforts, it is not always possible to deter or prevent technological or operational
failure, or fraud or other misconduct, and the precautions taken by the Company may not be effective in all cases. The
Company may be subject to litigation, losses, and regulatory actions in such cases, and may be required to expend significant
additional resources to remediate vulnerabilities or other exposures.
The Company also faces technology and operating risk when it employs the services of various external vendors, including
domestic and international outsourcing of certain technology, processing, and support functions. The Company manages its
exposure to such outsourcing risks through contractual provisions, control standards, and ongoing monitoring of vendor
performance. The Company maintains policies and procedures regarding the standard of care expected with Company data,
whether the data is internal company information, employee information, or non-public client information. The Company
clearly defines for employees, contractors, and vendors the Company’s expected standards of care for confidential data.
Regular training is provided by the Company in regard to data security.
The Company is actively engaged in the research and development of new technologies, services, and products. The
Company endeavors to protect its research and development efforts, and its brands, through the use of copyrights, patents,
trade secrets, and contracts.
Credit Risk
Credit risk is the potential for loss due to a client or counterparty failing to perform its contractual obligations, or the value of
collateral held to secure obligations proving to be inadequate. The Company’s direct exposure to credit risk mainly results
from margin lending activities, securities lending activities, mortgage lending activities, its role as a counterparty in financial
contracts and investing activities, and indirectly from the investing activities of certain of the proprietary funds that the
Company sponsors. To manage the risks of such losses, the Company has established policies and procedures which include:
establishing and reviewing credit limits, monitoring of credit limits and quality of counterparties, and adjusting margin
requirements for certain securities. In addition, most of the Company’s credit extensions, such as margin loans to clients,
securities lending agreements, and resale agreements, are supported by collateral arrangements. These arrangements are
subject to requirements to provide additional collateral in the event that market fluctuations result in declines in the value of
collateral received.
The Company’s credit exposure related to loans to banking clients is actively managed through individual and portfolio
reviews performed by management. Management regularly reviews asset quality including concentrations, delinquencies,
non-performing loans, losses, and recoveries. All are factors in the determination of an appropriate allowance for credit
losses, which is reviewed quarterly by senior management.
The Company’s loan portfolios primarily include first lien 3-, 5- and 7-year adjustable rate mortgage loans (First Mortgage
portfolio) of $3.2 billion and home equity lines of credit (HELOC portfolio) of $2.7 billion at December 31, 2008. The
Company does not offer loans that allow for negative amortization. The Company maintains credit underwriting standards
that have limited the exposure to the types of loans that experienced high foreclosures and loss rates elsewhere in the industry
during 2008. The Company does not originate or purchase subprime loans (generally defined as extensions of credit to
borrowers with a Fair Isaac & Company (FICO) credit score of less than 620 at origination), unless the borrower has
compensating credit factors. At December 31, 2008, approximately 1% of both the First Mortgage and HELOC portfolios
consisted of loans to borrowers with FICO credit scores of less than 620.
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The following table presents certain of the Company’s loan quality metrics as a percentage of total outstanding loans:
December 31, 2008 2007

Loan delinquencies (1) 0.54% 0.80%
Nonaccrual loans 0.13% 0.12%
Allowance for credit losses 0.33% 0.20%
(1)
Loan delinquencies are defined as loans that are 30 days or more past due.
The Company has exposure to credit risk associated with its securities available for sale portfolio, which totaled $14.4 billion
at December 31, 2008. This portfolio includes U.S. agency and non-agency mortgage-backed securities, corporate debt
securities, long term certificates of deposit, asset-backed securities and U.S. agency notes. U.S. agency mortgage-backed
securities do not have explicit credit ratings, however management considers these to be of the highest credit quality and
rating given the guarantee of principal and interest by the U.S. agencies. Included in non-agency mortgage-backed securities
are securities collateralized by loans that are considered to be “Prime” (defined by the Company as loans to borrowers with a
FICO credit score of 620 or higher at origination), and “Alt-A” (defined by the Company as Prime loans with reduced
documentation at origination).
The table below presents the credit ratings for U.S. agency and non-agency mortgage-backed securities, including prime and
Alt-A mortgage-backed securities by year of origination. In some instances securities have divergent ratings from Moody’s,
Fitch Ratings or Standard and Poor’s. In these instances the Company has used the lowest rating as of December 31, 2008 for
purposes of presenting the table below. Mortgage-backed securities, particularly Alt-A securities, experienced deteriorating
credit characteristics, including increased delinquencies, and valuation pressure in 2008. For a discussion of the impact of
current market conditions on mortgage-backed securities available for sale, see “Current Market Environment”.
AAA AA to A BBB BB or Lower Total

Net Net Net Net Net
Amortized Unrealized Amortized Unrealized Amortized Unrealized Amortized Unrealized Amortized Unrealized
Cost Gain (Loss) Cost Gain (Loss) Cost Gain (Loss) Cost Gain (Loss) Cost Gain (Loss)
U.S. agency mortgage-backed
securities:
2005 $ 813 $ (11) $ - $ - $ - $ - $ - $ - $ 813 $ (11)
2006 509 (13) - - - - - - 509 (13)
2007 1,053 20 - - - - - - 1,053 20
2008 5,828 30 - - - - - - 5,828 30
Total 8,203 26 - - - - - - 8,203 26
Non-agency mortgage-backed
securities:
2003 130 (16) - - - - - - 130 (16)
2004 337 (68) - - - - - - 337 (68)
2005 987 (226) 62 (29) - - 15 (7) 1,064 (262)
2006 260 (90) 202 (63) 126 (35) 309 (181) 897 (369)
2007 347 (54) 121 (32) 42 (10) 147 (51) 657 (147)
Total 2,061 (454) 385 (124) 168 (45) 471 (239) 3,085 (862)
Total mortgage-backed securities $ 10,264 $ (428) $ 385 $ (124) $ 168 $ (45) $ 471 $ (239) $ 11,288 $ (836)
% of Total mortgage-backed
securities 91% 3% 2% 4% 100%
At December 31, 2008, the corporate debt securities and non-mortgage asset-backed securities were rated investment grade
(defined as a rating equivalent to a Moody’s rating of “Baa” or higher, or a Standard and Poor’s rating of “BBB-” or higher).
- 34 -
Schwab performs clearing services for all securities transactions in its client accounts. Schwab has exposure to credit risk due
to its obligation to settle transactions with clearing corporations, mutual funds, and other financial institutions even if
Schwab’s client or a counterparty fails to meet its obligations to Schwab.
Concentration Risk
The Company is subject to concentration risk when holding large positions of financial instruments collateralized by assets
with similar economic characteristics or in securities of a single issuer or industry.
The Company’s investments in mortgage-backed securities totaled $10.4 billion at December 31, 2008. Of these, $8.2 billion
were U.S. agency securities and $2.2 billion were non-agency securities. Included in non-agency mortgage-backed securities
are securities collateralized by Alt-A loans. At December 31, 2008, the amortized cost and fair value of Alt-A mortgage-
backed securities were $798 million and $429 million, respectively.
The Company’s investments in corporate debt securities and commercial paper totaled $3.5 billion at December 31, 2008,
with the majority issued by institutions in the financial services industry. Included in corporate debt securities and commercial
paper at December 31, 2008, were $2.6 billion of securities issued by financial institutions and guaranteed under the FDIC
Temporary Liquidity Guarantee Program. These corporate debt securities and commercial paper are included in securities
available for sale and cash and investments segregated and on deposit for regulatory purposes in the Company’s consolidated
balance sheets.
The Company’s loans to banking clients includes $3.2 billion of first lien residential real estate mortgage loans at
December 31, 2008. Approximately 80% of these mortgages consisted of loans with interest-only payment terms. The interest
rates on approximately 80% of these interest-only loans are not scheduled to reset for three or more years. All interest-only
loans are underwritten based on underwriting standards that do not include interest terms described as temporary introductory
rates below current market rates. At December 31, 2008, 33% of the residential real estate mortgages and 46% of the home
equity lines of credit balances were secured by properties which are located in California. The Company is also subject to
concentration risk from its margin and securities lending activities collateralized by securities of a single issuer or industry.
The Company is subject to indirect exposure to U.S. Government and agency securities held as collateral to secure its resale
agreements. The Company’s primary credit exposure on these resale transactions is with its counterparty. The Company
would have exposure to the U.S. Government and agency securities only in the event of the counterparty’s default on the
resale agreements. U.S. Government and agency securities held as collateral for resale agreements, at December 31, 2008,
totaled $6.8 billion.
Market Risk
Market risk is the potential for changes in revenue or the value of financial instruments held by the Company as a result of
fluctuations in interest rates, equity prices or market conditions. For discussion of the Company’s market risk, see “Item 7A –
Quantitative and Qualitative Disclosures About Market Risk.”
Fiduciary Risk
Fiduciary risk is the potential for financial or reputational loss through breach of fiduciary duties to a client. Fiduciary
activities include, but are not limited to, individual and institutional trust, investment management, custody, and cash and
securities processing. The Company attempts to manage this risk by establishing procedures to ensure that obligations to
clients are discharged faithfully and in compliance with applicable legal and regulatory requirements. Business units have the
primary responsibility for adherence to the procedures applicable to their business. Guidance and control are provided
through the creation, approval, and ongoing review of applicable policies by business units and various fiduciary risk
committees.
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Legal and Regulatory Risk
The Company faces significant legal and compliance risk in its business, and the volume of litigation and regulatory
proceedings against financial services firms and the amount of damages claimed have been increasing. Among other things,
these risks relate to the suitability of client investments, conflicts of interest, disclosure obligations and performance
expectations for Company products and services, supervision of employees, and the adequacy of the Company’s controls.
Claims against the Company may increase due to a variety of factors, such as if clients suffer losses during a period of
deteriorating equity market conditions, as the Company increases the level of advice it provides to clients, and as the
Company enhances the services it provides to IAs. In addition, the Company and its affiliates are subject to extensive
regulation by federal, state and foreign regulatory authorities, and SROs, and such regulation is becoming increasingly
extensive and complex.
The Company attempts to manage legal and compliance risk through policies and procedures reasonably designed to avoid
litigation claims and prevent or detect violations of applicable legal and regulatory requirements. These procedures address
issues such as business conduct and ethics, sales and trading practices, marketing and communications, extension of credit,
client funds and securities, books and records, anti-money laundering, client privacy, employment policies, and contracts
management. Despite the Company’s efforts to maintain an effective compliance program and internal controls, legal
breaches and rule violations could result in reputational harm, significant losses and disciplinary sanctions, including
limitations on the Company’s business activities.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company uses fair value measurements to record certain financial assets and liabilities at fair value in accordance with
SFAS No. 157 – Fair Value Measurements (SFAS No. 157), and to determine fair value disclosures. At December 31, 2008,
42% of total assets ($21.9 billion) were recorded at fair value. All of these assets were measured at fair value using quoted
prices or market-based information and accordingly were classified as Level 1 or Level 2 measurements in accordance with
SFAS No. 157. Liabilities recorded at fair value were not material at December 31, 2008. See note “15 – Fair Value of Assets
and Liabilities” for more information on the Company’s assets and liabilities accounted for at fair value.
The Company uses prices obtained from an independent third-party pricing service to measure the fair value of certain
investment securities. The Company validates prices received from the pricing service using various methods including,
comparison to prices received from additional pricing services, comparison to available quoted market prices, internal
valuation models, and review of other relevant market data including implied yields of major categories of securities. The
Company does not adjust the prices received from the independent third-party pricing service unless such prices are
inconsistent with SFAS No. 157 and result in a material difference in the recorded amounts. At December 31, 2008, the
Company did not adjust prices received from the independent third-party pricing service. For certificates of deposits and
treasury securities included in investments segregated and on deposit for regulatory purposes, the Company uses discounted
cash-flow models to measure the fair value that utilize market-based inputs including observable market interest rates that
correspond to the remaining maturities or next interest reset dates.
CRITICAL ACCOUNTING ESTIMATES
The consolidated financial statements of the Company have been prepared in accordance with accounting principles generally
accepted in the U.S. While the majority of the Company's revenues, expenses, assets and liabilities are not based on estimates,
there are certain accounting principles that require management to make estimates regarding matters that are uncertain and
susceptible to change where such change may result in a material adverse impact on the Company’s financial position and
reported financial results. These critical accounting estimates are described below. Management regularly reviews the
estimates and assumptions used in the preparation of the Company’s financial statements for reasonableness and adequacy.
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Other-than-Temporary Impairment of Securities Available for Sale and Securities Held to Maturity: Management evaluates
securities available for sale and securities held to maturity for other-than-temporary impairment on a quarterly basis. For debt
securities, other-than-temporary impairment exists if management determines it is probable that the Company will not collect
all amounts due under the contractual terms of the security. Other-than-temporary impairment also exists if management no
longer has the ability or intent to hold a security with an unrealized loss for a period of time sufficient to allow for any
anticipated recovery. If management determines other-than temporary impairment exists, the cost basis of the security is
adjusted to the then-current fair value, with a corresponding loss recognized in current earnings. If future evaluations
conclude that an impairment now considered to be temporary is other-than-temporary, the Company would recognize a
realized loss through earnings at that time.
The evaluation of whether other-than-temporary impairment exists is a matter of judgment. The evaluation includes the
assessment of several factors including: 1) whether the unrealized loss is solely due to changes in interest rates, 2) the length
of time and the extent to which the fair value has been less than amortized cost, 3) the financial condition of the issuer, if
applicable, 4) the credit ratings of the issuer or security, 5) the credit characteristics of the collateral underlying the security,
including the credit default experience, delinquency rates, cumulative losses to date and the ratio of credit enhancement
available under the terms of the security to expected losses for non-agency mortgage-backed securities, and 6) the Company’s
intent and ability to hold the investment for a period of time sufficient to allow for any anticipated recovery. Additionally,
management utilizes cash flow models for securities that exhibit deteriorating credit characteristics to estimate the expected
cash flow from the securities in order to assess whether it is probable that the Company will not collect all amounts due under
the contractual terms of the security. These cash flow models require management to estimate future principal prepayments,
default rates, and default loss severities based on underlying collateral, and future housing price changes. Further deterioration
of these characteristics could result in the recognition of other-than-temporary impairment.
Valuation of Goodwill: Under the provisions of Statement of Financial Accounting Standards (SFAS) No. 142 – Goodwill
and Other Intangible Assets, goodwill is required to be tested for impairment at least annually, or whenever indications of
impairment exist. An impairment exists when the carrying amount of goodwill exceeds its implied fair value, resulting in an
impairment charge for this excess.
The Company has elected April 1st as its annual goodwill impairment testing date. In testing for a potential impairment of
goodwill on April 1, 2008, management estimated the fair value of each of the Company’s reporting units (generally defined
as the Company’s businesses for which financial information is available and reviewed regularly by management) and
compared this value to the carrying value of the reporting unit. The estimated fair value of each reporting unit was greater
than its carrying value, and therefore management concluded that no amount of goodwill was impaired. The estimated fair
value of the reporting units was established using a discounted cash flow model that includes significant assumptions about
the future operating results and cash flows of each reporting unit. Adverse changes in the Company’s planned business
operations such as unanticipated competition, a loss of key personnel, the sale of a reporting unit or a significant portion of a
reporting unit, or other unforeseen developments could result in an impairment of the Company’s recorded goodwill.
Allowance for Credit Losses: The Company regularly evaluates its portfolio of loans to banking clients and provides
allowances for the portion management believes may be uncollectible. Several factors are taken into consideration in this
evaluation including current economic conditions, the composition of the loan portfolio, past loss experience, and risks
inherent in the loan portfolio. For Schwab Bank’s portfolio, which primarily consists of mortgage loans and home equity lines
of credit, a risk-based methodology is used to determine the allowance for credit losses. Loans are categorized into portfolios
by loan type and risk characteristics. A probable loss rate, based on company and industry experience, is used to determine
the credit allowance.
Legal Reserve: Reserves for legal and regulatory claims and proceedings reflect an estimate of probable losses for each
matter, after considering, among other factors, the progress of the case, prior experience and the experience of others in
similar cases, available defenses, insurance coverage and indemnification, and the opinions and views of legal counsel. In
many cases, including most class action lawsuits, it is not possible to determine whether a loss will be incurred, or to estimate
the range of that loss, until the matter is close to resolution, in which case no accrual is made until that time. Reserves are
- 37 -
adjusted as more information becomes available or when an event occurs requiring a change. Significant judgment is required
in making these estimates, and the actual cost of resolving a matter may ultimately differ materially from the amount reserved.
The Company’s management has discussed the development and selection of these critical accounting estimates with the
Audit Committee. Additionally, management has reviewed with the Audit Committee the Company’s significant estimates
discussed in this Management’s Discussion and Analysis of Financial Condition and Results of Operations.
FORWARD-LOOKING STATEMENTS
In addition to historical information, this Annual Report on Form 10-K contains “forward-looking statements” within the
meaning of Section 27A of the Securities Act, and Section 21E of the Securities Exchange Act of 1934. Forward-looking
statements are identified by words such as “believe,” “anticipate,” “expect,” “intend,” “plan,” “will,” “may,” “estimate,”
“aim,” “target,” and other similar expressions. In addition, any statements that refer to expectations, projections, or other
characterizations of future events or circumstances are forward-looking statements.
These forward-looking statements, which reflect management’s beliefs, objectives, and expectations as of the date hereof, are
necessarily estimates based on the best judgment of the Company’s senior management. These statements relate to, among
other things:
 the Company’s ability to pursue its business strategy (see “Item 1 – Business – Business Strategy and Competitive
Environment”);
 the impact of legal proceedings and regulatory matters (see “Item 3 – Legal Proceedings” and “Item 8 – Financial
Statements and Supplementary Data – Notes to Consolidated Financial Statements –13. Commitments and
Contingent Liabilities – Legal Contingencies”);
 the impact of current market conditions on the Company’s results of operations (see “Current Market Environment”);
 target capital ratios (see “Liquidity and Capital Resources”);
 sources of liquidity, capital, and level of dividends (see “Liquidity and Capital Resources and Contractual
Obligations”);
 capital expenditures (see “Liquidity and Capital Resources – Capital Resources”);
 the impact of changes in management’s estimates on the Company’s results of operations (see “Critical Accounting
Estimates”);
 the impact on the Company’s results of operations of recording stock option expense (see “Item 8 – Financial
Statements and Supplementary Data – Notes to Consolidated Financial Statements – 17. Employee Incentive,
Deferred Compensation, and Retirement Plans”);
 the impact of changes in estimated costs related to past restructuring initiatives on the Company’s results of
operations (see “Item 8 – Financial Statements and Supplementary Data – Notes to Consolidated Financial
Statements – 25. Restructuring Reserve); and
 the impact of changes in the likelihood of indemnification and guarantee payment obligations on the Company’s
results of operations (see “Item 8 – Financial Statements and Supplementary Data – Notes to Consolidated Financial
Statements – 13. Commitments and Contingent Liabilities”).
Achievement of the expressed beliefs, objectives and expectations described in these statements is subject to certain risks and
uncertainties that could cause actual results to differ materially from the expressed beliefs, objectives, and expectations.
Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this
Annual Report on Form 10-K or, in the case of documents incorporated by reference, as of the date of those documents.
Important factors that may cause actual results to differ include, but are not limited to:
 changes in general economic and financial market conditions;
 changes in revenues and profit margin due to changes in interest rates;
 unanticipated adverse developments in litigation or regulatory matters;
 fluctuations in client asset values due to changes in equity valuations;
 the performance of securities available for sale;
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 the amount of loans to the Company’s brokerage and banking clients;

 the level of brokerage client cash balances and deposits from banking clients;
 the availability and terms of external financing;
 the level of the Company’s stock repurchase activity;
 the timing and impact of changes in the Company’s level of investments in technology and buildings;
 the Company’s ability to sublease certain properties; and
 potential breaches of contractual terms for which the Company has indemnification obligations.
Certain of these factors, as well as general risk factors affecting the Company, are discussed in greater detail in this Annual
Report on Form 10-K, including “Item 1A – Risk Factors.”
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Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Market risk is the potential for changes in revenue or the value of financial instruments held by the Company as a result of
fluctuations in interest rates, equity prices or market conditions.
For the Company’s market risk related to interest rates, a sensitivity analysis, referred to as a net interest revenue simulation
model, is shown below. The Company is exposed to interest rate risk primarily from changes in the interest rates on its
interest-earning assets relative to changes in the costs of its funding sources which finance these assets.
Net interest revenue is affected by various factors, such as the distribution and composition of interest-earning assets and
interest bearing liabilities, the spread between yields earned on interest-earning assets and rates paid on interest-bearing
liabilities, which may re-price at different times or by different amounts, and the spread between short and long term interest
rates. Interest earning-assets include residential real estate loans and mortgage backed securities. These assets are sensitive to
changes in interest rates and to changes to prepayment levels, which tend to increase in a declining rate environment.
To mitigate the risk of loss, the Company has established policies and procedures which include setting guidelines on the
amount of net interest revenue at risk, and monitoring the net interest margin and average maturity of its interest-earning
assets and funding sources. To remain within these guidelines, the Company manages the maturity, repricing, and cash flow
characteristics of its investment portfolios. Because the Company establishes the rates paid on certain brokerage client cash
balances and deposits from banking clients, the rates charged on margin loans, and controls the composition of its investment
securities, it has some ability to manage its net interest spread, depending on competitive factors and market conditions.
The Company is also subject to market risk as a result of fluctuations in equity prices. The Company’s direct holdings of
equity securities and its associated exposure to equity prices are not material. The Company is indirectly exposed to equity
market fluctuations in connection with securities collateralizing margin loans to brokerage customers, and customer securities
loaned out as part of the Company’s securities lending activities. Equity market valuations may also affect the level of
brokerage client trading activity, margin borrowing, and overall client engagement with the Company. Additionally, the
Company earns mutual fund service fees and asset management fees based upon daily balances of certain client assets.
Fluctuations in these client asset balances caused by changes in equity valuations directly impact the amount of fee revenue
earned by the Company.
Financial instruments held by the Company are also subject to liquidity risk – that is, the risk that valuations will be
negatively affected by changes in demand and the underlying market for a financial instrument. Recent conditions in the
credit markets have significantly reduced market liquidity in a wide range of financial instruments, including the types of
instruments held by the Company, and fair value can differ significantly from the value implied by the credit quality and
actual performance of the instrument’s underlying cash flows.
Financial instruments held by the Company are also subject to valuation risk as a result of changes in valuations of the
underlying collateral, such as housing prices in the case of residential real estate loans and mortgage-backed securities.
For discussion of the impact of current market conditions on asset management and administration fees, net interest revenue,
and securities available for sale, see “Item 7 – Management’s Discussion and Analysis of Financial Condition and Results of
Operations – Current Market Environment”.
The Company’s market risk related to financial instruments held for trading, interest rate swaps related to a portion of its
fixed interest rate medium-term notes, and forward sale and interest rate lock commitments related to its loans held for sale
portfolio is not material.
Net Interest Revenue Simulation
The Company uses net interest revenue simulation modeling techniques to evaluate and manage the effect of changing interest
rates. The simulation model (the model) includes all interest-sensitive assets and liabilities, as well as interest rate swap
agreements utilized by the Company to hedge its interest rate risk. Key variables in the model include the repricing of
financial instruments, prepayment and reinvestment assumptions, and product pricing assumptions. The Company uses
- 40 -
constant balances and market rates in the model assumptions in order to minimize the number of variables and to better isolate
risks. The simulations involve assumptions that are inherently uncertain and, as a result, cannot precisely estimate net interest
revenue or precisely predict the impact of changes in interest rates on net interest revenue. Actual results may differ from
simulated results due to balance growth or decline and the timing, magnitude, and frequency of interest rate changes, as well
as changes in market conditions and management strategies, including changes in asset and liability mix.
As represented by the simulations presented below, the Company is positioned so that the consolidated balance sheet
produces an increase in net interest revenue when interest rates rise and, conversely, a decrease in net interest revenue when
interest rates fall (i.e., interest-earning assets generally reprice more quickly than interest-bearing liabilities).
The simulations in the following table assume that the asset and liability structure of the consolidated balance sheet would not
be changed as a result of the simulated changes in interest rates. As the Company actively manages its consolidated balance
sheet and interest rate exposure, in all likelihood the Company would take steps to manage any additional interest rate
exposure that could result from changes in the interest rate environment. The following table shows the results of a gradual
100 basis point increase or decrease in market interest rates relative to the Company’s current market rates forecast on
simulated net interest revenue over the next 12 months at December 31, 2008 and 2007. While the Company typically uses a
gradual 200 basis point change, it revised the methodology at March 31, 2008 due to the current low levels of interest rates.
The Company will use a gradual 100 basis point change until such time as the level of interest rates justifies a return to the
previous methodology.
December 31, 2008 2007

Increase of 100 basis points 6.4% 4.4%
Decrease of 100 basis points (6.8%) (3.1%)
The sensitivity shown in the 100 basis point decrease scenario reflects the fact that the rates paid on brokerage client cash
balances and banking deposits had reached minimal levels by year-end 2008. With liability costs essentially fixed, lower rates
earned on interest-bearing assets would have a direct impact on net interest income. The Company remains positioned to
experience increases in net interest revenue as rates rise and decreases as rates fall.
- 41 -
Item 8. Financial Statements and Supplementary Data
TABLE OF CONTENTS
Consolidated Statements of Income ------------------------------------------------------------------------------------------------- 43

Consolidated Balance Sheets --------------------------------------------------------------------------------------------------------- 44
Consolidated Statements of Cash Flows -------------------------------------------------------------------------------------------- 45
Consolidated Statements of Stockholders’ Equity -------------------------------------------------------------------------------- 46
Notes to Consolidated Financial Statements --------------------------------------------------------------------------------------- 47
Note 1. Introduction and Basis of Presentation -------------------------------------------------------------------------------- 47
Note 2. Summary of Significant Accounting Policies ------------------------------------------------------------------------ 47
Note 3. Receivables from Brokerage Clients ---------------------------------------------------------------------------------- 51
Note 4. Other Securities Owned ------------------------------------------------------------------------------------------------- 51
Note 5. Securities Available for Sale and Securities Held to Maturity ----------------------------------------------------- 52
Note 6. Loans to Banking Clients and Related Allowance for Credit Losses --------------------------------------------- 55
Note 7. Equipment, Office Facilities, and Property --------------------------------------------------------------------------- 55
Note 8. Other Assets -------------------------------------------------------------------------------------------------------------- 56
Note 9. Deposits from Banking Clients ----------------------------------------------------------------------------------------- 56
Note 10. Payables to Brokers, Dealers, and Clearing Organizations --------------------------------------------------------- 56
Note 11. Payables to Brokerage Clients ------------------------------------------------------------------------------------------ 56
Note 12. Borrowings ---------------------------------------------------------------------------------------------------------------- 56
Note 13. Commitments and Contingent Liabilities ----------------------------------------------------------------------------- 58
Note 14. Financial Instruments Subject to Off-Balance Sheet Risk, Credit Risk, or Market Risk ----------------------- 60
Note 15. Fair Values of Assets and Liabilities ---------------------------------------------------------------------------------- 63
Note 16. Accumulated Other Comprehensive Loss ----------------------------------------------------------------------------- 66
Note 17. Employee Incentive, Deferred Compensation, and Retirement Plans --------------------------------------------- 67
Note 18. Taxes on Income --------------------------------------------------------------------------------------------------------- 69
Note 19. Earnings Per Share ------------------------------------------------------------------------------------------------------- 71
Note 20. Regulatory Requirements ----------------------------------------------------------------------------------------------- 72
Note 21. Segment Information ---------------------------------------------------------------------------------------------------- 73
Note 22. Capital Restructuring ---------------------------------------------------------------------------------------------------- 75
Note 23. Business Acquisition ----------------------------------------------------------------------------------------------------- 76
Note 24. Discontinued Operations ------------------------------------------------------------------------------------------------ 76
Note 25. Restructuring Reserve --------------------------------------------------------------------------------------------------- 77
Note 26. The Charles Schwab Corporation – Parent Company Only Financial Statements ------------------------------- 77
Note 27. Quarterly Financial Information (Unaudited) ------------------------------------------------------------------------ 80
Report of Independent Registered Public Accounting Firm --------------------------------------------------------------------- 81
Management’s Report on Internal Control Over Financial Reporting ---------------------------------------------------------- 82
- 42 -
Consolidated Statements of Income

(In Millions, Except Per Share Amounts)

Net Revenues
Asset management and administration fees $ 2,355 $ 2,358 $ 1,945
Interest revenue 1,908 2,270 2,113
Interest expense (243) (623) (679)
Net interest revenue 1,665 1,647 1,434
Trading revenue 1,080 860 785
Other 50 129 145
Total net revenues 5,150 4,994 4,309
Expenses Excluding Interest
Compensation and benefits 1,667 1,781 1,619
Professional services 334 324 285
Occupancy and equipment 299 282 260
Advertising and market development 243 230 189
Communications 211 200 180
Depreciation and amortization 152 156 157
Other 216 168 143
Total expenses excluding interest 3,122 3,141 2,833
Income from continuing operations before taxes on income 2,028 1,853 1,476
Taxes on income (798) (733) (585)
Income from continuing operations 1,230 1,120 891
(Loss) income from discontinued operations, net of tax (18) 1,287 336
Net Income $ 1,212 $ 2,407 $ 1,227
Weighted-Average Common Shares Outstanding — Diluted 1,157 1,222 1,286

Earnings Per Share — Basic
Income from continuing operations $ 1.07 $ .93 $ .70
(Loss) income from discontinued operations, net of tax $ (.01) $ 1.06 $ .27
Net income $ 1.06 $ 1.99 $ .97
Earnings Per Share — Diluted

Net income $ 1.05 $ 1.97 $ .95
Dividends Declared Per Common Share $ .220 $ 1.200 $ .135
See Notes to Consolidated Financial Statements.
- 43 -
Consolidated Balance Sheets

(In Millions, Except Share and Per Share Amounts)
December 31, 2008 2007
Assets
Cash and cash equivalents $ 5,442 $ 6,764
Cash and investments segregated and on deposit for regulatory purposes
(including resale agreements of $6,701 in 2008 and $2,722 in 2007) 14,685 8,803
Receivables from brokers, dealers, and clearing organizations 759 725
Receivables from brokerage clients — net 7,129 12,314
Other securities owned — at fair value 626 675
Securities available for sale 14,446 7,526
Securities held to maturity (fair value — $244 at December 31, 2008) 243 -
Loans to banking clients — net 6,044 3,443
Loans held for sale 41 44
Equipment, office facilities, and property — net 661 617
Goodwill 528 525
Other assets 1,071 850
Total $ 51,675 $ 42,286
Liabilities and Stockholders’ Equity

Deposits from banking clients $ 23,841 $ 13,822
Payables to brokers, dealers, and clearing organizations 1,100 1,922
Payables to brokerage clients 20,256 20,290
Accrued expenses and other liabilities 1,534 1,621
Long-term debt 883 899
Total Liabilities 47,614 38,554
Stockholders’ equity:
Preferred stock — 9,940,000 shares authorized; $.01 par value per share; none issued - -
Common stock — 3 billion shares authorized; $.01 par value per share;
1,392,091,544 shares issued 14 14
Additional paid-in capital 2,214 2,107
Retained earnings 6,735 5,776
Treasury stock — 234,991,565 and 231,274,906 shares in 2008 and 2007,
respectively, at cost (4,349) (4,148)
Accumulated other comprehensive loss (553) (17)
Total stockholders’ equity 4,061 3,732
Total $ 51,675 $ 42,286
- 44 -
Consolidated Statements of Cash Flows

(In Millions)

Cash Flows from Operating Activities
Net income $ 1,212 $ 2,407 $ 1,227
Adjustments to reconcile net income to net cash provided by
operating activities:
Loss (income) from discontinued operations, net of tax 18 (1,287) (336)
Depreciation and amortization expense 152 156 157
Stock-based compensation expense 69 58 39
Excess tax benefits from stock-based compensation (50) (108) (64)
Provision for deferred income taxes 97 175 (31)
Other 114 16 (2)
Originations of loans held for sale (1,526) (863) (638)
Proceeds from sales of loans held for sale 1,522 849 626
Net change in:
Cash and investments segregated and on deposit for
regulatory purposes (5,882) 2,059 4,331
Other securities owned 48 (277) 73
Receivables from brokers, dealers, and clearing organizations (32) (75) 170
Receivables from brokerage clients 5,171 (1,394) (151)
Other assets 51 (33) (6)
Payables to brokers, dealers, and clearing organizations (822) 424 204
Payables to brokerage clients (34) (331) (4,079)
Accrued expenses and other liabilities (106) (419) 164
Net cash provided by discontinued operations - 389 76
Net cash provided by operating activities 2 1,746 1,760
Cash Flows from Investing Activities
Purchases of securities available for sale (9,839) (3,554) (3,224)
Proceeds from sales of securities available for sale 14 - 81
Principal payments on securities available for sale 2,003 2,034 854
Purchases of securities held to maturity (245) - -
Principal payments on securities held to maturity 2 - -
Net increase in loans to banking clients (2,642) (1,129) (442)
Purchase of equipment, office facilities, and property (188) (168) (122)
Proceeds from sales of equipment, office facilities, and property 2 - 63
Proceeds from sale of U.S. Trust, net of transaction costs - 3,237 -
Cash payments for business combinations, net of cash acquired (5) (119) -
Other investing activities (3) (1) 6
Net cash provided by (used for) discontinued operations - 67 (456)
Net cash (used for) provided by investing activities (10,901) 367 (3,240)
Cash Flows from Financing Activities
Net change in deposits from banking clients 10,019 2,802 4,051
Issuance of long-term debt - 549 -
Repayment of long-term debt (20) (43) (68)
Excess tax benefits from stock-based compensation 50 108 64
Dividends paid (253) (1,500) (173)
Purchase of treasury stock (350) (2,742) (868)
Proceeds from stock options exercised and other 131 414 253
Other financing activities - (7) 1
Net cash provided by discontinued operations - 563 822
Net cash provided by financing activities 9,577 144 4,082
(Decrease) increase in Cash and Cash Equivalents (1,322) 2,257 2,602
Cash and Cash Equivalents at Beginning of Year 6,764 4,507 1,905
Cash and Cash Equivalents at End of Year $ 5,442 $ 6,764 $ 4,507
Supplemental Cash Flow Information

Cash paid during the year for:
Interest $ 232 $ 616 $ 666
Income taxes (amounts include discontinued operations) $ 767 $ 1,071 $ 618
- 45 -
Consolidated Statements of Stockholders' Equity

(In Millions)
Accumulated
Additional Unamortized Other
Common Stock Paid-In Retained Treasury Stock, Stock-based Comprehensive
Shares Amount Capital Earnings at cost Compensation Loss Total
Balance at December 31, 2005 1,392 $ 14 $ 1,827 $ 3,847 $ (1,124) $ (81) $ (33) $ 4,450
Comprehensive income:
Net income - - - 1,227 - - - 1,227
Net unrealized loss on cash flow hedging instruments,
net of reclassification adjustment and tax - - - - - - (6) (6)
Net unrealized gain on securities available for sale,
net of tax - - - - - - 7 7
Foreign currency translation adjustment - - - - - - 1 1
Total comprehensive income 1,229
Adjustment to initially apply SFAS No. 158, net of tax - - - - - - (5) (5)
Dividends declared on common stock - - - (173) - - - (173)
Purchase of treasury stock - - - - (859) - - (859)
Stock option exercises and other - - 6 - 249 - - 255
Stock-based compensation expense - - 52 - - - - 52
Excess tax benefits from stock-based compensation - - 64 - - - - 64
Restricted shares withheld for tax - - - - (5) - - (5)
Adoption of SFAS No. 123R - - (81) - - 81 - -
Balance at December 31, 2006 1,392 14 1,868 4,901 (1,739) - (36) 5,008
Net income - - - 2,407 - - - 2,407
Net unrealized loss on cash flow hedging instruments,
net of reclassification adjustment and tax - - - - - - (3) (3)
Net unrealized gain on securities available for sale,
net of tax - - - - - - 17 17
Minimum pension liability adjustment, net of tax - - - - - - 5 5
Total comprehensive income 2,426
Dividends declared on common stock - - - (1,498) - - - (1,498)
Purchase of treasury stock - - - - (2,742) - - (2,742)
Stock option exercises and other - - 53 - 362 - - 415
Adoption of EITF 06-02 - - - (17) - - - (17)
Adoption of FIN 48 - - - (17) - - - (17)
Balance at December 31, 2007 1,392 14 2,107 5,776 (4,148) - (17) 3,732
Net income - - - 1,212 - - - 1,212
Net unrealized loss on securities available for sale,
net of tax - - - - - - (535) (535)
Foreign currency translation adjustment - - - - - - (1) (1)
Total comprehensive income 676
Dividends declared on common stock - - - (253) - - - (253)
Purchase of treasury stock - - - - (350) - - (350)
Stock option exercises and other - - (20) - 149 - - 129
Employee stock purchase plan purchases - - 12 - 11 - - 23
Balance at December 31, 2008 1,392 $ 14 $ 2,214 $ 6,735 $ (4,349) - $ (553) $ 4,061
- 46 -
Notes to Consolidated Financial Statements
(Tabular Amounts in Millions, Except Per Share Data, Option Price Amounts, Ratios, or as Noted)
1. Introduction and Basis of Presentation
The Charles Schwab Corporation (CSC) is a savings and loan holding company engaged, through its subsidiaries, in securities
brokerage, banking, and related financial services. Charles Schwab & Co., Inc. (Schwab) is a securities broker-dealer with
306 domestic branch offices in 45 states, as well as a branch in each of the Commonwealth of Puerto Rico and London, U.K.
In addition, Schwab serves clients in Hong Kong through one of CSC's subsidiaries. Other subsidiaries include Charles
Schwab Bank (Schwab Bank), a federal savings bank, and Charles Schwab Investment Management, Inc. (CSIM), the
investment advisor for Schwab’s proprietary mutual funds, which are referred to as the Schwab Funds®.
The consolidated financial statements include CSC and its majority-owned subsidiaries (collectively referred to as the
Company). All material intercompany balances and transactions have been eliminated. These consolidated financial
statements have been prepared in conformity with accounting principles generally accepted in the U.S. (GAAP), which
require management to make certain estimates and assumptions that affect the reported amounts in the accompanying
financial statements. Certain estimates include other-than-temporary impairment of securities available for sale and securities
held to maturity, the valuation of goodwill, the allowance for credit losses, and legal reserves. Actual results could differ from
those estimates. Certain prior-year amounts have been reclassified to conform to the 2008 presentation.
On July 1, 2007, the Company completed the sale of all of the outstanding stock of U.S. Trust Corporation (USTC, and with
its subsidiaries collectively referred to as U.S. Trust). U.S. Trust was a subsidiary that provided wealth management services.
U.S. Trust is presented as a discontinued operation for all periods prior to the completion of the sale. All other information
contained in this Annual Report on Form 10-K is presented on a continuing operations basis unless otherwise noted.
2. Summary of Significant Accounting Policies
Asset management and administration fees: Asset management and administration fees, which include mutual fund service
fees and fees for other asset-based financial services provided to individual and institutional clients, are recognized as revenue
over the period that the related service is provided, based upon average net asset balances. The Company earns mutual fund
service fees for transfer agent services, shareholder services, administration, and investment management provided to its
proprietary funds, and recordkeeping and shareholder services provided to third-party funds. Mutual fund service fees are
based upon the daily balances of client assets invested in third-party funds and the Company’s proprietary funds. These daily
asset balances are based upon quoted market prices and other observable market data. The Company also earns asset
management fees for advisory and managed account services, which are based on the daily balances of client assets subject to
the specific fee for service.
Interest revenue: Interest revenue represents interest earned on certain assets, which include cash and cash equivalents, cash
and investments segregated, receivables from brokerage clients, securities available for sale, securities held to maturity, and
loans to banking clients. Interest revenue is recognized in the period earned based upon average daily asset balances and
respective interest rates.
Securities transactions: Trading revenue includes commission revenues and revenues from principal transactions. Clients’
securities transactions are recorded on the date that they settle, while the related commission revenues and expenses are
recorded on the date that the trade occurs. Principal transactions are recorded on a trade date basis.
Cash and cash equivalents: The Company considers all highly liquid investments with original maturities of three months or
less that are not segregated and on deposit for regulatory purposes to be cash equivalents. Cash and cash equivalents include
money market funds, deposits with banks, certificates of deposit, federal funds sold, commercial paper, and treasury
securities. Cash and cash equivalents also include balances that Schwab Bank maintains at the Federal Reserve Bank.
Cash and investments segregated and on deposit for regulatory purposes include securities purchased under agreements to
resell (resale agreements) which are collateralized by U.S. Government and agency securities. Resale agreements are
collateralized investing transactions that are recorded at their contractual amounts plus accrued interest. The Company obtains
- 47 -
control of collateral with a market value equal to or in excess of the principal amount loaned and accrued interest under resale
agreements. Collateral is valued daily by the Company, with additional collateral obtained when necessary. Cash and
investments segregated also include certificates of deposit and U.S. Treasury securities, as well as corporate debt securities
and commercial paper guaranteed by the Federal Deposit Insurance Corporation (FDIC) under the Temporary Liquidity
Guarantee Program. Certificates of deposit, U.S. Treasury securities, corporate debt securities, and commercial paper are
recorded at fair value.
Receivables from brokerage clients include margin loans to clients and are stated net of allowance for doubtful accounts. Cash
receivables from brokerage clients that remain unsecured or partially secured for more than 30 days are fully reserved.
Other securities owned include Schwab Funds money market funds, fixed income securities, equity and other securities, and
equity and bond mutual funds recorded at fair value based on quoted market prices. Unrealized gains and losses are included
in trading revenue.
Securities available for sale are recorded at fair value based on quoted prices for similar securities in active markets and other
observable market data. Securities available for sale include U.S. agency and non-agency mortgage-backed securities,
corporate debt securities, asset-backed securities, certificates of deposit, and U.S. agency notes. The Company evaluates these
securities for other-than-temporary impairment on a quarterly basis. If the Company determines other-than-temporary
impairment exists, the cost basis of the security is adjusted to the then-current fair value, with a corresponding loss recognized
in current earnings. Unrealized gains and losses are reported, net of taxes, in accumulated other comprehensive income (loss)
included in stockholders’ equity. Realized gains and losses from sales of securities available for sale are determined on a
specific identification basis and are included in other revenue.
Securities held to maturity are recorded at amortized cost based on the Company’s positive intent and ability to hold these
securities to maturity. The Company evaluates these securities for other-than-temporary impairment on a quarterly basis. If
the Company determines other-than-temporary impairment exists, the cost basis of the security is adjusted to the then-current
fair value, with a corresponding loss recognized in current earnings.
Securities borrowed and securities loaned: Securities borrowed require the Company to deliver cash to the lender in exchange
for securities and are included in receivables from brokers, dealers, and clearing organizations. For securities loaned, the
Company receives collateral in the form of cash in an amount equal to the market value of securities loaned. Securities loaned
are included in payables to brokers, dealers, and clearing organizations. The Company monitors the market value of securities
borrowed and loaned, with additional collateral obtained or refunded when necessary. Fees received or paid are recorded in
interest revenue or interest expense.
Loans to banking clients are stated net of allowance for credit losses. The allowance is established through charges to income
based on management’s evaluation of the existing portfolio. The adequacy of the allowance is reviewed regularly by
management, taking into consideration current economic conditions, the existing loan portfolio composition, past loss
experience, and risks inherent in the portfolio, as more fully described below.
The Company performs a quarterly analysis to estimate the allowance for credit losses. This process utilizes loan-level
statistical models that estimate prepayments, defaults, and lifetime contractual losses for our loan portfolios based on
predicted behavior of individual loans within the portfolios. The models consider effects of borrower behavior and a variety
of factors including, but not limited to, interest rate fluctuations, housing price movements, current economic conditions,
estimated defaults and foreclosures, delinquencies, the loan portfolio composition (including concentrations of credit risk),
past loss experience, estimates of loss severity, and credit scores. The more significant variables within the models are interest
rates and housing prices. Predicted housing price scenarios are primarily based on 20 years of historical prices at the
metropolitan statistical area level. Interest rate projections are based on the current term structure of interest rates and
historical volatilities to project various possible future interest rate paths. Other variables in the model, such as probability of
default, are derived from historical data. This quarterly analysis results in a loss factor that is applied to the outstanding
balances to determine the allowance for credit loss for each loan category.
- 48 -
Nonaccrual loans: Loans are placed on nonaccrual status upon becoming 90 days past due as to interest or principal (unless
the loans are both well-secured and in the process of collection), or when the full timely collection of interest or principal
becomes uncertain. When a loan is placed on nonaccrual status, the accrued and unpaid interest receivable is reversed and the
loan is accounted for on the cash or cost recovery method thereafter, until qualifying for return to accrual status. Generally, a
loan may be returned to accrual status when all delinquent interest and principal become current in accordance with the terms
of the loan agreement, or when the loan is both well-secured and in the process of collection and collectability is no longer
doubtful.
Loans held for sale consist of fixed-rate and adjustable-rate residential real estate mortgage loans intended for sale. Loans
held for sale are stated at lower of cost or market value. Fair value is estimated using quoted market prices for securities
backed by similar types of loans.
Equipment, office facilities, and property: Equipment and office facilities are depreciated on a straight-line basis over the
estimated useful life of the asset of three to ten years. Buildings are depreciated on a straight-line basis over forty years.
Leasehold improvements are amortized on a straight-line basis over the lesser of the estimated useful life of the asset or the
term of the lease. Software and certain costs incurred for purchasing or developing software for internal use are amortized on
a straight-line basis over an estimated useful life of three or five years. Equipment, office facilities, and property are stated at
cost net of accumulated depreciation and amortization, except for land, which is stated at cost. Equipment, office facilities,
and property are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of
such assets may not be recoverable.
Goodwill represents the cost of acquired businesses in excess of the fair value of the related net assets acquired. Goodwill is
tested for impairment annually and whenever indications of impairment exist. In testing for a potential impairment of
goodwill, management estimates the fair value of each of the Company’s reporting units (defined as the Company’s
businesses for which financial information is available and reviewed regularly by management), and compares it to their
carrying value. If the estimated fair value of a reporting unit is less than its carrying value, management is required to estimate
the fair value of all assets and liabilities of the reporting unit, including goodwill. If the carrying value of the reporting unit’s
goodwill is greater than the estimated fair value, an impairment charge is recognized for the excess. The Company has elected
April 1st as its annual impairment testing date.
Intangible assets: The Company has non-amortizing intangible assets related to contracts acquired to manage investments of
mutual funds that totaled $14 million at December 31, 2008 and 2007. Non-amortizing intangible assets are subject to
impairment testing annually and whenever events or changes in circumstances indicate that their carrying amount may not be
recoverable. The Company has amortizing intangible assets, primarily related to purchased client accounts, that totaled
$10 million at December 31, 2008. These intangible assets have finite lives and are amortized over their estimated useful lives
and are subject to impairment testing whenever events or changes in circumstances indicate that their carrying amount may
not be recoverable. These amortizing intangible assets have a remaining weighted-average useful life of 12 years. All
intangible assets are recorded in other assets.
Derivative financial instruments are recorded on the balance sheet in other assets and other liabilities at fair value. As part of
its consolidated asset and liability management process, the Company utilizes interest rate swap agreements (Swaps) to
effectively convert the interest rate characteristics of a portion of its Medium-Term Notes from fixed to variable. These Swaps
have been designated as fair value hedges and therefore, changes in fair value of the Swaps are offset by changes in the fair
value of the hedged Medium-Term Notes.
Schwab Bank’s loans held for sale portfolio consists of fixed-rate and adjustable-rate mortgages, which are subject to a loss in
value when market interest rates rise. Schwab Bank uses forward sale commitments to manage this risk. These forward sale
commitments have been designated as cash flow hedging instruments with respect to the loans held for sale. Accordingly, the
fair values of these forward sale commitments are recorded on the Company’s consolidated balance sheet, with gains or losses
recorded in other comprehensive income (loss).
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Additionally, Schwab Bank uses forward sale commitments to hedge interest rate lock commitments issued on mortgage loans
that will be held for sale. Schwab Bank considers the fair value of these commitments to be zero at the commitment date, with
subsequent changes in fair value determined solely based on changes in market interest rates. Any changes in fair value of the
interest rate lock commitments are completely offset by changes in fair value of the related forward sale commitments.
Income taxes: The Company provides for income taxes on all transactions that have been recognized in the consolidated
financial statements in accordance with Statement of Financial Accounting Standards No. 109 – Accounting for Income
Taxes (SFAS No. 109). Accordingly, deferred tax assets are adjusted to reflect the tax rates at which future taxable amounts
will likely be settled or realized. The effects of tax rate changes on future deferred tax assets and deferred tax liabilities, as
well as other changes in income tax laws, are recorded in earnings in the period during which such changes are enacted. The
Company records uncertain tax positions in accordance with Financial Accounting Standards Board (FASB) Interpretation
(FIN) No. 48, Accounting for Uncertainty in Income Taxes.
Stock-based compensation: The Company measures and recognizes compensation expense based on estimated fair values for
all share-based payment arrangements including employee and director stock option and restricted stock awards, in
accordance with Statement of Financial Accounting Standards No. 123 (revised 2004) – Share Based Payment (SFAS
No. 123R).
Stock-based compensation expense is based on awards expected to vest and therefore is reduced for estimated forfeitures.
Forfeitures are estimated at the time of grant based on the Company’s historical forfeiture experience and revised in
subsequent periods if actual forfeitures differ from those estimates.
Long-term incentive compensation: Eligible officers received long-term incentive plan units under a long-term incentive plan
(LTIP). These awards are restricted from transfer or sale and vest annually over a three- to four-year performance period.
Each award provides for a one-time cash payment for an amount that varies based upon the Company’s cumulative earnings
per share (EPS) over the respective performance period of each grant. The Company accrues the estimated total cost for each
grant on a straight-line basis over each LTIP’s vesting period with periodic cumulative adjustments to expense as estimates of
the total grant cost are revised. The last performance period on existing grants under this incentive plan ended on
December 31, 2008.
New accounting standards: SFAS No. 157 – Fair Value Measurements was effective beginning January 1, 2008. This
statement defines fair value, establishes a framework for measuring fair value in GAAP, and expands disclosures about fair
value measurements. SFAS No. 157 does not require any new fair value measurements. The adoption of SFAS No. 157 did
not have a material impact on the Company’s financial position, results of operations, EPS, or cash flows, but expanded the
disclosures in the Company’s consolidated financial statements. See note “15 – Fair Values of Assets and Liabilities,” for
disclosures pursuant to SFAS No. 157.
SFAS No. 159 – The Fair Value Option for Financial Assets and Financial Liabilities was effective beginning January 1,
2008. This statement permits entities to elect to measure eligible financial instruments, commitments, and certain other
arrangements at fair value at specified election dates with changes in fair value recognized in earnings at each subsequent
reporting period. The Company made no such election on January 1, 2008, or during 2008. The adoption of SFAS No. 159
did not have any impact on the Company’s financial position, results of operations, EPS, or cash flows.
SFAS No. 141R – Business Combinations was issued in December 2007. This statement generally requires an acquirer to
recognize the assets acquired, the liabilities assumed, contingent purchase consideration, and any noncontrolling interest in
the acquiree, at fair value on the date of acquisition. SFAS No. 141R also requires an acquirer to expense most transaction
and restructuring costs as incurred, and not include such items in the cost of the acquired entity. The adoption of SFAS
No. 141R will not have an impact on the Company’s financial position, results of operations, EPS, or cash flows, as SFAS
No. 141R applies prospectively for all business acquisitions with an acquisition date on or after January 1, 2009. Early
adoption is prohibited.
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SFAS No. 160 – Noncontrolling Interests in Consolidated Financial Statements, was issued in December 2007 and is effective
beginning January 1, 2009. This statement amends Accounting Research Bulletin No. 51 – Consolidated Financial Statements
by establishing financial statement presentation and disclosure requirements for reporting noncontrolling ownership interests.
SFAS No. 160 also establishes consistent accounting methods for changes in ownership interest and for the valuation of
retained noncontrolling investments upon deconsolidation. The adoption of SFAS No. 160 is not expected to have a material
impact on the Company’s financial position, results of operations, EPS, or cash flows.
SFAS No. 161 – Disclosures about Derivative Instruments and Hedging Activities, was issued in March 2008 and is effective
beginning January 1, 2009. This statement amends the disclosure requirements of SFAS No. 133 – Accounting for Derivative
Instruments and Hedging Activities by requiring qualitative disclosures about objectives and strategies for using derivatives,
quantitative disclosures about fair values and gains and losses on derivative instruments, and disclosures about credit-risk
related contingent features in derivative agreements. SFAS No. 161 does not require any new derivative or hedging
measurements. The adoption of SFAS No. 161 will not impact the Company’s financial position, results of operations, EPS,
or cash flows, but will expand the disclosures in the Company’s condensed consolidated financial statements.
FASB Staff Position (FSP) on EITF Issue 03-6-1 (FSP EITF 03-6-1) – Determining Whether Instruments Granted in Share-
Based Payment Transactions are Participating Securities, was issued in June 2008 and is effective beginning January 1, 2009.
This statement requires the inclusion of unvested share-based payment awards with non-forfeitable rights to dividends or
dividend equivalents as participating securities in the computation of EPS under the two-class method described in SFAS
No. 128 – Earnings per Share. The requirements of this statement require retrospective adjustment to all prior-period EPS
data presented. Early adoption is prohibited. The Company is currently evaluating the impact of the adoption of FSP EITF 03-
6-1 on its disclosures of EPS. The adoption of FSP EITF 03-6-1 will not impact the Company’s financial position, results of
operations, or cash flows.
3. Receivables from Brokerage Clients
Receivables from brokerage clients are stated net of allowance for doubtful accounts of $4 million and $1 million at
December 31, 2008 and 2007, respectively. Receivables from brokerage clients consist primarily of margin loans to brokerage
clients of $6.2 billion and $11.6 billion at December 31, 2008 and 2007, respectively. Securities owned by brokerage clients
are held as collateral for margin loans. Such collateral is not reflected in the consolidated financial statements. Charge-offs
related to margin loans were not material in 2008, 2007 and 2006. The average yield earned on margin loans was 5.95% and
8.00% in 2008 and 2007, respectively.
4. Other Securities Owned
A summary of other securities owned is as follows:
December 31, 2008 2007

Schwab Funds money market funds $ 440 $ 413
Fixed income, equity, and other securities 124 175
Equity and bond mutual funds 62 87
Total other securities owned (1) $ 626 $ 675
(1)
Amounts include securities pledged of $7 million in 2008 and $6 million in 2007.
The Company’s positions in Schwab Funds money market funds arise from certain overnight funding of clients’ redemption,
check-writing, and debit card activities. Fixed income, equity, and other securities include investments made by the Company
relating to its deferred compensation plan and fixed income securities held to meet clients’ trading activities. Equity and bond
mutual funds include mutual fund investments held at CSC and inventory maintained to facilitate certain Schwab Funds and
third-party mutual fund clients’ transactions.
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Securities sold, but not yet purchased of $2 million at December 31, 2008 and $6 million at December 31, 2007, consisted
primarily of mutual fund shares that are distributed to clients to satisfy their dividend reinvestment requests. These securities
are recorded at fair value in accrued expenses and other liabilities.
5. Securities Available for Sale and Securities Held to Maturity
The amortized cost, gross unrealized gains and losses, and fair value of securities available for sale and securities held to
maturity are as follows:
Gross Gross
Amortized Unrealized Unrealized Fair
December 31, 2008 Cost Gains Losses Value
Securities available for sale:
U.S. agency mortgage-backed securities $ 8,203 $ 108 $ 82 $ 8,229
Non-agency mortgage-backed securities 3,085 - 862 2,223
Corporate debt securities 1,762 2 31 1,733
Certificates of deposit 925 - 3 922
Asset-backed securities 866 - 44 822
U.S. agency notes 515 2 - 517
Total securities available for sale $ 15,356 $ 112 $ 1,022 $ 14,446
Securities held to maturity:
Asset-backed securities $ 243 $ 1 $ - $ 244
Total securities held to maturity $ 243 $ 1 $ - $ 244
Gross Gross
Non-agency mortgage-backed securities 3,503 4 33 3,474
Corporate debt securities 804 1 21 784
Certificates of deposit 345 - - 345
U.S. agency notes 15 - - 15
Total securities available for sale $ 7,556 $ 30 $ 60 $ 7,526
There were no securities classified as held to maturity at December 31, 2007.
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A summary of securities with unrealized losses, aggregated by category and period of continuous unrealized loss is as
follows:
Less than 12 months

12 months or longer Total
Fair Unrealized Fair Unrealized Fair Unrealized
December 31, 2008 Value Losses Value Losses Value Losses
U.S. agency mortgage-backed securities $ 2,231 $ 63 $ 381 $ 19 $ 2,612 $ 82
Non-agency mortgage-backed securities 1,704 512 513 350 2,217 862
Corporate debt securities 477 11 436 20 913 31
Certificates of deposit 647 3 - - 647 3
Asset-backed securities 822 44 - - 822 44
Total temporarily impaired securities (1) $ 5,881 $ 633 $ 1,330 $ 389 $ 7,211 $ 1,022
(1)
The number of investment positions with unrealized losses totaled 334.
Less than 12 months

12 months or longer Total
Fair Unrealized Fair Unrealized Fair Unrealized
December 31, 2007 Value Losses Value Losses Value Losses
U.S. agency mortgage-backed securities $ 549 $ 4 $ 106 $ 2 $ 655 $ 6
Non-agency mortgage-backed securities 1,382 12 1,263 21 2,645 33
Corporate debt securities 620 21 - - 620 21
Total temporarily impaired securities $ 2,551 $ 37 $ 1,369 $ 23 $ 3,920 $ 60
Management evaluates securities available for sale and securities held to maturity for other-than-temporary impairment on a
quarterly basis. For debt securities, other-than-temporary impairment exists if management determines it is probable that the
Company will not collect all amounts due under the contractual terms of the security. Other-than-temporary impairment also
exists if management no longer has the ability or intent to hold a security with an unrealized loss for a period of time
sufficient to allow for any anticipated recovery. If management determines other-than-temporary impairment exists, the cost
basis of the security is adjusted to the then-current fair value, with a corresponding loss recognized in current earnings. If
future evaluations conclude that an impairment now considered to be temporary is other-than-temporary, the Company would
recognize a realized loss through earnings at that time. Based on management’s evaluation, no other-than-temporary
impairment was indicated as of December 31, 2008.
The evaluation of whether other-than-temporary impairment exists is a matter of judgment. The evaluation includes the
assessment of several factors including: 1) whether the unrealized loss is solely due to changes in interest rates, 2) the length
of time and the extent to which the fair value has been less than amortized cost, 3) the financial condition of the issuer, if
applicable, 4) the credit ratings of the issuer or security, 5) the credit characteristics of collateral underlying the security,
including the credit default experience, delinquency rates, cumulative losses to date and the ratio of credit enhancement
available under the terms of the security to expected losses for non-agency mortgage-backed securities, and 6) the Company’s
intent and ability to hold the investment for a period of time sufficient to allow for any anticipated recovery. Additionally,
management utilizes cash flow models for securities that exhibit deteriorating credit characteristics to estimate the expected
cash flow from the securities in order to assess whether it is probable that the Company will not collect all amounts due under
the contractual terms of the security. These cash flow models require management to estimate future principal prepayments,
default rates, and default loss severities based on underlying collateral, and future housing price changes. Further deterioration
of these characteristics could result in the recognition of other-than-temporary impairment.
Unrealized losses in securities available for sale were $1.0 billion as of December 31, 2008, and were concentrated in non-
agency mortgage-backed securities. U.S. agency mortgage-backed securities do not have explicit credit ratings, however
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management considers these to be of the highest credit quality given the guarantee of principal and interest by the U.S.
agencies. Included in non-agency mortgage-backed securities are securities collateralized by loans that are considered to be
“Alt-A” (defined as loans with reduced documentation at origination). Although Alt-A mortgage-backed securities
experienced deteriorating credit characteristics and valuation pressure in 2008, management determined that no other-than-
temporary impairment existed at December 31, 2008 for these securities. At December 31, 2008, the amortized cost and fair
value of Alt-A mortgage-backed securities were $798 million and $429 million, respectively.
Included in corporate debt securities were $876 million of securities issued by financial institutions and guaranteed under the
FDIC Temporary Liquidity Guarantee Program. The Company recorded losses of $75 million related to two corporate debt
securities in its securities available for sale portfolio in 2008. On September 15, 2008, Lehman Brothers Holdings, Inc.
(Lehman) filed a Chapter 11 bankruptcy petition and on September 25, 2008, the FDIC seized Washington Mutual Bank. As a
result of these events, the Company sold these debt securities in 2008. These sales reflected significant unanticipated changes
in the financial condition of their issuers and do not impact the Company’s ability and intent to hold the remaining securities.
The maturities of securities available for sale and securities held to maturity at December 31, 2008 are as follows:
Within 1-5 5-10 After

U.S. agency mortgage-backed securities (1) $ - $ - $ 239 $ 7,990 $ 8,229
Non-agency mortgage-backed securities (1) - - 44 2,179 2,223
Corporate debt securities 490 1,243 - - 1,733
Certificates of deposit 774 148 - - 922
Asset-backed securities - 624 198 - 822
U.S. agency notes 316 201 - - 517
Total fair value $ 1,580 $ 2,216 $ 481 $ 10,169 $ 14,446
Total amortized cost $ 1,598 $ 2,265 $ 487 $ 11,006 $ 15,356
Asset-backed securities $ - $ 217 $ 27 $ - $ 244
Total fair value $ - $ 217 $ 27 $ - $ 244
Total amortized cost $ - $ 216 $ 27 $ - $ 243
(1)
Mortgage-backed securities have been allocated over maturity groupings based on final contractual maturities. Actual
maturities will differ from final contractual maturities because a certain portion of loans underlying these securities
require scheduled principal payments and borrowers have the right to prepay obligations.
The proceeds and gross realized gains (losses) from the sale of securities available for sale are as follows:
December 31, 2008 2007 2006

Proceeds $ 14 $ - $ 81
Gross realized gains $ - $ - $ -
Gross realized losses $ (75) $ - $ -
Realized gains and losses from sales of securities available for sale and other-than-temporary impairment charges are included
in other revenue.
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6. Loans to Banking Clients and Related Allowance for Credit Losses
An analysis of the composition of the loan portfolio is as follows:
December 31, 2008 2007

Residential real estate mortgages $ 3,195 $ 2,101
Home equity lines of credit 2,662 1,234
Secured personal loans 187 102
Other 20 13
Total loans to banking clients 6,064 3,450
Allowance for credit losses (20) (7)
Total loans to banking clients – net $ 6,044 $ 3,443
Included in the loan portfolio are nonaccrual loans totaling $8 million and $4 million at December 31, 2008 and 2007,
respectively. Nonperforming assets, which include nonaccrual loans and other real estate owned, totaled $9 million and
$4 million at December 31, 2008 and 2007, respectively. The Company did not have any impaired loans during 2008 and
2007. There were no loans accruing interest that were contractually 90 days or more past due at both December 31, 2008 and
2007. For 2008 and 2007, the amount of interest revenue which would have been earned on nonaccrual loans versus interest
revenue recognized on these loans was not material to the Company’s results of operations.
Changes in the allowance for credit losses were as follows:
December 31, 2008 2007 2006

Balance at beginning of year $ 7 $ 4 $ 3
Charge-offs (4) - -
Recoveries - - -
Provision for credit loss 17 3 1
Balance at end of year $ 20 $ 7 $ 4
7. Equipment, Office Facilities, and Property
Equipment, office facilities, and property are detailed below:
December 31, 2008 2007

Software $ 846 $ 781
Buildings 414 383
Information technology equipment 392 369
Leasehold improvements 251 257
Furniture and equipment 123 122
Telecommunications equipment 97 98
Land 57 52
Construction in progress 14 6
Total equipment, office facilities, and property 2,194 2,068
Accumulated depreciation and amortization (1,533) (1,451)
Total equipment, office facilities, and property - net $ 661 $ 617
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8. Other Assets
The components of other assets are as follows:
December 31, 2008 2007

Deferred tax asset – net $ 502 $ 254
Accounts receivable (1) 216 326
Interest and dividends receivable 92 110
Prepaid expenses 66 53
Other investments 45 42
Intangible assets – net 24 23
Other 126 42
Total other assets $ 1,071 $ 850
(1)
Accounts receivable include accrued service fee income and receivable from loan servicer.
9. Deposits from Banking Clients
Deposits from banking clients consist of money market, high-yield investor checking, and other savings deposits, certificates
of deposit, and noninterest-bearing deposits. Interest-bearing deposits were $23.8 billion and $13.8 billion at December 31,
2008 and 2007, respectively. Noninterest-bearing deposits were not material at December 31, 2008 and 2007. Demand
deposit overdrafts included as other loans within loans to banking clients were not material at December 31, 2008 and 2007.
10. Payables to Brokers, Dealers, and Clearing Organizations
Payables to brokers, dealers, and clearing organizations consist primarily of securities loaned of $883 million and $1.7 billion
at December 31, 2008 and 2007, respectively. The cash collateral received from counterparties under securities lending
transactions was equal to or greater than the market value of the securities loaned.
11. Payables to Brokerage Clients
The principal source of funding for Schwab’s margin lending is cash balances in brokerage client accounts, which are
included in payables to brokerage clients. Cash balances in interest-bearing brokerage client accounts were $15.8 billion and
$15.0 billion at December 31, 2008 and 2007, respectively. The average rate paid on cash balances in interest-bearing
brokerage client accounts was 0.36% and 2.23% in 2008 and 2007, respectively.
12. Borrowings
Long-term debt net of unamortized debt discounts, where applicable, consists of the following:
December 31, 2008 2007

Senior Medium-Term Notes, Series A $ 458 $ 473
Junior subordinated notes 300 299
Finance lease obligation 116 121
Fair value adjustment 9 6
Total long-term debt $ 883 $ 899
- 56 -
The aggregate principal amount of Senior Medium-Term Notes, Series A (Medium-Term Notes) outstanding at December 31,
2008 had maturities ranging from 2009 to 2017. At both December 31, 2008 and 2007, the aggregate principal amount of
Medium-Term Notes outstanding had fixed interest rates ranging from 6.375% to 8.05%. At December 31, 2008 and 2007,
the Medium-Term Notes carried a weighted-average interest rate of 7.13% and 7.11%, respectively. A portion of the
Medium-Term Notes are subject to fair value hedging instruments as described in note “14 – Financial Instruments Subject to
Off-Balance Sheet Risk, Credit Risk, or Market Risk.”
In October 2007, CSC and Schwab Capital Trust I, a statutory trust formed under the laws of the State of Delaware (Trust),
closed a public offering of $300 million of the Trust's fixed to floating rate trust preferred securities. The proceeds from the
sale of the trust preferred securities were invested by the Trust in fixed to floating rate junior subordinated notes issued by
CSC (Subordinated Debt). The Subordinated Debt has a fixed interest rate of 7.50% until November 15, 2017, and a floating
rate thereafter. The Subordinated Debt may be redeemed at a redemption price of principal plus accrued but unpaid interest on
November 15, 2017, on or after November 15, 2037, or following the occurrence of certain events, and at a make-whole
redemption price at any other time. CSC has contractually agreed, pursuant to a replacement capital covenant, for the benefit
of certain holders of the Company’s long-term indebtedness ranking senior to the Subordinated Debt, not to redeem, repay or
purchase the Subordinated Debt or the trust preferred securities prior to November 15, 2047, unless it has received proceeds
of the issuance of certain replacement capital securities, among other conditions. At December 31, 2008, the Company’s
6.375% Senior Medium-Term Notes due 2017 is the series of long-term indebtedness whose holders are entitled to the
benefits of the replacement capital covenant.
In 2004, the Company sold an office building for proceeds of $136 million and leased the property back for a 20-year term.
This transaction was accounted for as a financing lease. The remaining finance lease obligation of $116 million at
December 31, 2008 is being reduced by a portion of the lease payments over the remaining lease term of approximately
16 years.
Annual maturities on long-term debt outstanding at December 31, 2008 are as follows:
2009 $ 13
2010 205
2011 6
2012 6
2013 6
Thereafter 639
Total maturities 875
Fair value adjustment 9
Unamortized discount (1)
Total long-term debt $ 883
CSC has authorization from its Board of Directors to issue unsecured commercial paper notes (Commercial Paper Notes) not
to exceed $1.5 billion. Management has set a current limit for the commercial paper program of $800 million. The maturities
of the Commercial Paper Notes may vary, but are not to exceed 270 days from the date of issue. The commercial paper is not
redeemable prior to maturity and is not subject to voluntary prepayment. The proceeds of the commercial paper program are
to be used for general corporate purposes. CSC commenced issuing Commercial Paper Notes in April 2008. There were no
Commercial Paper Notes outstanding at December 31, 2008.
CSC maintains an $800 million committed, unsecured credit facility with a group of fourteen banks which is scheduled to
expire in June 2009. This facility replaced a facility that expired in June 2008. Any issuances under CSC’s commercial
program will reduce the amount available under this facility. The funds under this facility are available for general corporate
purposes, including repayment of Commercial Paper Notes discussed above. The financial covenants in this facility require
Schwab to maintain a minimum net capital ratio, as defined, Schwab Bank to be well capitalized, as defined, and CSC to
maintain a minimum level of stockholders’ equity. At December 31, 2008, the minimum level of stockholders’ equity
required under this facility was $2.6 billion. These facilities were unused at December 31, 2008 and 2007.
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To manage short-term liquidity, Schwab maintains uncommitted, unsecured bank credit lines with a group of six banks
totaling $1.1 billion at December 31, 2008. CSC has access to $1.0 billion of these credit lines. The amount available to CSC
under these lines is lower than the amount available to Schwab because the credit line provided by one of these banks is only
available to Schwab. There were no borrowings outstanding under these lines at December 31, 2008 and 2007.
To satisfy the margin requirement of client option transactions with the Options Clearing Corporation (OCC), Schwab has
unsecured standby letter of credit (LOCs) agreements with seven banks in favor of the OCC aggregating $550 million at
December 31, 2008. In connection with its securities lending activities, Schwab is required to provide collateral to certain
brokerage clients. Schwab satisfies the collateral requirements by arranging LOCs, in favor of these brokerage clients, which
are issued by multiple banks. At December 31, 2008, the aggregate face amount of these LOCs totaled $100 million. No funds
were drawn under any of these LOCs at December 31, 2008 and 2007.
13. Commitments and Contingent Liabilities
Operating leases and other commitments: The Company has noncancelable operating leases for office space and equipment.
Future minimum rental commitments under these leases, net of committed subleases, at December 31, 2008 are as follows:
Operating
Leases (1) Subleases (1) Net
2009 $ 161 $ (43) $ 118
2010 150 (35) 115
2011 127 (28) 99
2012 84 (24) 60
2013 66 (22) 44
Thereafter 208 (84) 124
Total $ 796 $ (236) $ 560
(1)
Amounts include facilities under the Company’s past restructuring initiatives.
Certain leases contain provisions for renewal options, purchase options, and rent escalations based on increases in certain
costs incurred by the lessor. Rent expense was $186 million in 2008, $180 million in 2007, and $166 million in 2006.
Purchase Obligations: The Company has purchase obligations for services such as advertising and marketing,
telecommunications, professional services, and hardware- and software-related agreements. At December 31, 2008, the
Company has purchase obligations as follows:
2009 $ 214
2010 85
2011 21
2012 2
2013 1
Thereafter -
Total $ 323
Guarantees: The Company recognizes, at the inception of a guarantee, a liability for the estimated fair value of the obligation
undertaken in issuing the guarantee. The fair values of the obligations relating to standby LOCs are estimated based on fees
charged to enter into similar agreements, considering the creditworthiness of the counterparties. The fair values of the
obligations relating to other guarantees are estimated based on transactions for similar guarantees or expected present value
measures.
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In the normal course of business, the Company provides certain indemnifications (i.e., protection against damage or loss) to
counterparties in connection with the disposition of certain of its assets. Such indemnifications are generally standard
contractual terms with various expiration dates and typically relate to title to the assets transferred, ownership of intellectual
property rights (e.g., patents), accuracy of financial statements, compliance with laws and regulations, failure to pay, satisfy or
discharge any liability, or to defend claims, as well as errors, omissions, and misrepresentations. The maximum potential
future liability under these indemnifications cannot be estimated. The Company has not recorded a liability for these
indemnifications and believes that the occurrence of events that would trigger payments under these agreements is remote.
Separately, the Company has guaranteed certain payments in the event of a termination of certain mutual fund sub-advisor
agreements, related to the adoption of AXA Rosenberg LLC’s U.S. family of mutual funds, known as the Laudus Funds.
Additionally, the Company has provided indemnifications related to facility leases and technology services to a counterparty
in connection with the disposition of certain of its assets. At December 31, 2008, the Company’s maximum potential future
liability under these agreements was approximately $120 million. Further, as discussed below under “Legal contingencies,”
the Company provided an indemnification to UBS Securities LLC and UBS Americas Inc. (collectively referred to as UBS)
for expenses associated with certain litigation. At December 31, 2008, the Company has a recorded liability of approximately
$20 million reflecting the estimated fair value of these guarantees and indemnifications. The fair value of these guarantees and
indemnifications is not necessarily indicative of amounts that would be paid in the event a payment was required.
The Company has clients that sell (i.e., write) listed option contracts that are cleared by various clearing houses. The clearing
houses establish margin requirements on these transactions. The Company satisfies the margin requirements by arranging
LOCs, in favor of the clearing houses, which are issued by multiple banks. At December 31, 2008, the aggregate face amount
of these LOCs totaled $550 million. In connection with its securities lending activities, Schwab is required to provide
collateral to certain brokerage clients. Schwab satisfies the collateral requirements by arranging LOCs, in favor of these
brokerage clients, which are issued by multiple banks. At December 31, 2008, the aggregate face amount of these LOCs
totaled $100 million. No funds were drawn under any of these LOCs at December 31, 2008.
The Company also provides guarantees to securities clearing houses and exchanges under their standard membership
agreement, which requires members to guarantee the performance of other members. Under the agreement, if another member
becomes unable to satisfy its obligations to the clearing houses and exchanges, other members would be required to meet
shortfalls. The Company’s liability under these arrangements is not quantifiable and may exceed the cash and securities it has
posted as collateral. However, the potential requirement for the Company to make payments under these arrangements is
remote. Accordingly, no liability has been recognized for these transactions.
Legal contingencies: The Company is subject to claims and lawsuits in the ordinary course of business, including arbitrations,
class actions, and other litigation, some of which include claims for substantial or unspecified damages. The Company is also
the subject of inquiries, investigations, and proceedings by regulatory and other governmental agencies. In addition, the
Company is responding to certain litigation claims brought against former subsidiaries pursuant to indemnities it has provided
to purchasers of those entities. Certain of these matters are described below.
The Company believes it has strong defenses in all significant matters currently pending and is contesting liability and the
damages claimed. Nevertheless, some of these matters may result in adverse judgments or awards, including penalties,
injunctions, or other relief, and the Company may also determine to settle a matter because of the uncertainty and risks of
litigation. Predicting the outcome of a matter is inherently difficult, particularly where claims are brought on behalf of various
classes of claimants, claimants seek substantial or unspecified damages, or when investigations or legal proceedings are at an
early stage. In many cases, including those matters described below, it is not possible to determine whether a loss will be
incurred or to estimate the range of that loss until the matter is close to resolution. However, based on current information and
consultation with counsel, management believes that the resolution of matters currently pending will not have a material
adverse impact on the financial condition or cash flows of the Company, but could be material to the Company’s operating
results for a particular future period, depending on results for that period.
YieldPlus Fund Litigation: The Company is the subject of nine purported class action lawsuits filed between March and May
2008 on behalf of investors in the Schwab YieldPlus Fund® alleging violations of state law and federal securities law in
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connection with the fund’s investment policy, disclosures and fund marketing. Defendants named in one or more of the
lawsuits include the Company, Schwab, CSIM, the fund itself, Schwab Investments (registrant and issuer of the fund’s
shares), Charles R. Schwab, Randall W. Merk (current president of the fund), and current and former trustees and officers of
the fund and/or Schwab. Claimants seek unspecified compensatory and rescission damages, unspecified equitable and
injunctive relief, and costs and attorneys fees. On July 3, 2008, the U.S. District Court for the Northern District of California
consolidated all nine lawsuits into a single action for purposes of pre-trial proceedings and appointed a group of fund
investors as lead plaintiff. On October 2, 2008, plaintiffs filed a consolidated amended complaint which seeks certification of
two separate classes of plaintiffs for the federal and state law claims. On February 4, 2009, the court denied defendants’
motion to dismiss plaintiffs’ federal law and certain state law claims, dismissed certain state law claims without prejudice, and
lifted a stay on discovery.
Total Bond Market Fund Litigation: On August 28, 2008, a class action lawsuit was filed in the U.S. District Court for the
Northern District of California on behalf of investors in the Schwab Total Bond Market Fund™. The lawsuit, which alleges
violations of state law and federal securities law in connection with the fund’s investment policy, names the fund, Schwab
Investments (registrant and issuer of the fund’s shares), Schwab, and CSIM as defendants. Claimants seek unspecified
compensatory and rescission damages, unspecified equitable and injunctive relief, and costs and attorneys fees. On
February 19, 2009, the court denied defendants’ motion to dismiss plaintiff’s federal law claim, and dismissed certain state
law claims with leave to amend.
SoundView Litigation: As part of the sale of Schwab Capital Markets L.P. and all of the outstanding capital stock of
SoundView Technology Group, Inc. (SoundView), (collectively referred to as Schwab SoundView Capital Markets, or
SSCM), to UBS, the Company agreed to indemnify UBS for certain litigation. SoundView and certain of its subsidiaries are
among the numerous financial institutions named as defendants in multiple purported securities class actions filed in the
United States District Court for the Southern District of New York (the IPO Allocation Litigation) between June and
December 2001. The IPO Allocation Litigation was brought on behalf of persons who either directly or in the aftermarket
purchased IPO securities between March 1997 and December 2000. The plaintiffs allege that SoundView entities and the
other underwriters named as defendants required customers receiving allocations of IPO shares to pay excessive and
undisclosed commissions on unrelated trades and to purchase shares in the aftermarket at prices higher than the IPO price, in
violation of the federal securities laws. SoundView entities have been named in 31 of the actions, each involving a different
company’s IPO, and had underwriting commitments in approximately 90 other IPOs that are the subject of lawsuits.
SoundView entities have not been named as defendants in these cases, although the lead underwriters in those IPOs have
asserted that depending on the outcome of the cases, SoundView entities may have indemnification or contribution
obligations based on underwriting commitments in the IPOs. The parties, with the assent of the District Court, selected 17
cases as focus cases for the purpose of case-specific discovery, and on October 13, 2004, the District Court allowed six of the
focus cases to proceed as class actions. Defendants appealed that decision to the United States Court of Appeals for the
Second Circuit, which issued an order on December 5, 2006 reversing the District Court’s decision to allow the six focus
cases to proceed as class actions. On April 6, 2007, the Court of Appeals denied the plaintiffs’ request for rehearing. In
August and September 2007, plaintiffs filed amended class action complaints and renewed motions for class certification,
which again seek approval for the cases to proceed as class actions. On March 26, 2008, the District Court denied defendants’
motion to dismiss the amended class action complaints, except with respect to certain claims of a limited number of plaintiffs
who sold securities at prices in excess of the initial offering price or who purchased securities outside the class period.
14. Financial Instruments Subject to Off-Balance Sheet Risk, Credit Risk, or Market Risk
Securities lending: Through Schwab, the Company loans client securities temporarily to other brokers in connection with its
securities lending activities. The Company receives cash as collateral for the securities loaned. Increases in security prices
may cause the market value of the securities loaned to exceed the amount of cash received as collateral. In the event the
counterparty to these transactions does not return the loaned securities or provide additional cash collateral, the Company may
be exposed to the risk of acquiring the securities at prevailing market prices in order to satisfy its client obligations. The
Company mitigates this risk by requiring credit approvals for counterparties, by monitoring the market value of securities
loaned, and by requiring additional cash as collateral when necessary. The market value of Schwab’s client securities pledged
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in securities lending transactions to other broker-dealers was $760 million and $1.6 billion at December 31, 2008 and 2007,
respectively. Additionally, Schwab borrows securities from other broker-dealers to fulfill short sales of its clients. The market
value of these borrowed securities was $259 million and $320 million at December 31, 2008 and 2007, respectively.
Client trade settlement: The Company is obligated to settle transactions with brokers and other financial institutions even if its
clients fail to meet their obligations to the Company. Clients are required to complete their transactions on settlement date,
generally three business days after trade date. If clients do not fulfill their contractual obligations, the Company may incur
losses. The Company has established procedures to reduce this risk by requiring deposits from clients in excess of amounts
prescribed by regulatory requirements for certain types of trades, and therefore the potential for Schwab to make payments
under these client transactions is remote. Accordingly, no liability has been recognized for these transactions.
Margin lending: Schwab provides margin loans to its clients which are collateralized by securities in their brokerage
accounts. Schwab may be liable for the margin requirement of its client margin securities transactions. As clients write
options or sell securities short, the Company may incur losses if the clients do not fulfill their obligations and the collateral in
client accounts is not sufficient to fully cover losses which clients may incur from these strategies. To mitigate this risk, the
Company monitors required margin levels and clients are required to deposit additional collateral, or reduce positions, when
necessary. Clients with margin loans have agreed to allow Schwab to pledge collateralized securities in their brokerage
accounts in accordance with federal regulations. Schwab was allowed, under such regulations, to pledge securities with a
market value of $9.2 billion and $16.7 billion at December 31, 2008 and 2007, respectively. The market value of Schwab’s
client securities pledged to fulfill the short sales of its clients was $591 million and $1.3 billion at December 31, 2008 and
2007, respectively. The market value of Schwab’s client securities pledged to fulfill Schwab’s proprietary short sales was
$42 million and $38 million at December 31, 2008 and 2007, respectively. Schwab has also pledged a portion of its securities
owned in order to fulfill the short sales of clients and in connection with securities lending transactions to other broker-
dealers. The market value of these pledged securities was $7 million and $6 million at December 31, 2008 and 2007,
respectively. The Company may also pledge client securities to fulfill client margin requirements for open option contracts
established with the OCC. The market value of these pledged securities to the OCC was $774 million and $215 million at
December 31, 2008 and 2007, respectively.
Financial instruments held for trading purposes: The Company maintains inventories in securities on a long and short basis
relating to its fixed income operations. The Company could incur losses or gains as a result of changes in the fair value of
these securities. To mitigate the risk of losses, long and short positions are marked to market and are monitored by
management to assure compliance with limits established by the Company.
Resale and repurchase agreements: Schwab enters into collateralized resale agreements principally with other broker-dealers,
which could result in losses in the event the counterparty to the transaction does not purchase the securities held as collateral
for the cash advanced and the market value of these securities declines. To mitigate this risk, Schwab requires that the
counterparty deliver securities to a custodian, to be held as collateral, with a market value in excess of the resale price.
Schwab also sets standards for the credit quality of the counterparty, monitors the market value of the underlying securities as
compared to the related receivable, including accrued interest, and requires additional collateral where deemed appropriate. At
December 31, 2008 and 2007, the market value of collateral received in connection with resale agreements that are available
to be repledged or sold was $6.8 billion and $2.8 billion, respectively. For Schwab to repledge or sell this collateral, it would
be required to deposit into its segregated reserve bank accounts cash and/or securities of an equal amount in order to meet its
segregated cash and investment requirement.
Concentration risk: The Company is subject to concentration risk when holding large positions of financial instruments
collateralized by assets with similar economic characteristics or in securities of a single issuer or industry.
The Company’s investments in mortgage-backed securities totaled $10.4 billion and $6.4 billion at December 31, 2008 and
2007, respectively. Of these, $8.2 billion and $2.9 billion were U.S. agency securities and $2.2 billion and $3.5 billion were
non-agency securities at December 31, 2008 and 2007, respectively. Included in the non-agency mortgage-backed securities
portfolio at December 31, 2008 are securities collateralized by loans that are considered “Alt-A”. Alt-A mortgage-backed
securities experienced deteriorating credit characteristics and valuation pressure in 2008. At December 31, 2008, the
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amortized cost and fair value of Alt-A mortgage-backed securities were $798 million and $429 million, respectively.
The Company’s investments in corporate debt securities and commercial paper totaled $3.5 billion and $784 million at
December 31, 2008 and 2007, respectively, with the majority issued by institutions in the financial services industry. Included
in corporate debt securities and commercial paper at December 31, 2008, were $2.6 billion of securities issued by financial
institutions and guaranteed under the FDIC Temporary Liquidity Guarantee Program. These corporate debt securities and
commercial paper are included in securities available for sale and cash and investments segregated and on deposit for
regulatory purposes.
The Company’s portfolio of loans to banking clients totaled $6.0 billion and $3.4 billion at December 31, 2008 and 2007,
respectively. At December 31, 2008, approximately 80% of the residential real estate mortgages consisted of loans with
interest-only payment terms. At December 31, 2008, the interest rates on approximately 80% of these interest-only loans are
not scheduled to reset for three or more years. All interest-only loans are underwritten based on underwriting standards that
do not include interest terms described as temporary introductory rates below current market rates. At December 31, 2008,
33% of residential real estate mortgages and 46% of the home equity lines of credit (HELOC) balances were secured by
properties which are located in California. At December 31, 2007, 31% of residential real estate mortgages and 45% of the
HELOC balances were secured by properties which are located in California.
The Company is also subject to concentration risk from its margin and securities lending activities collateralized by securities
of a single issuer or industry.
The Company is subject to indirect exposure to U.S. Government and agency securities held as collateral to secure its resale
agreements. The Company’s primary credit exposure on these resale transactions is with its counterparty. The Company
would have exposure to the U.S. Government and agency securities only in the event of the counterparty’s default on the
resale agreements. U.S. Government and agency securities held as collateral for resale agreements at December 31, 2008 and
2007 totaled $6.8 billion and $2.8 billion, respectively.
Commitments to extend credit: In the normal course of business, Schwab Bank enters into various transactions involving off-
balance sheet financial instruments to meet the needs of their clients and to reduce their own exposure to interest rate risk. The
credit risk associated with these instruments varies depending on the creditworthiness of the client and the value of any
collateral held. Collateral requirements vary by type of instrument. The contractual amounts of these instruments represent the
amounts at risk should the contract be fully drawn upon, the client default, and the value of any existing collateral become
worthless.
Credit-related financial instruments represent firm commitments to extend credit (firm commitments). Firm commitments are
legally binding agreements to lend to a client that generally have fixed expiration dates or other termination clauses, may
require payment of a fee and are not secured by collateral until funds are advanced. Collateral held includes marketable
securities, real estate mortgages or other assets. The majority of Schwab Bank’s firm commitments are related to mortgage
lending to banking clients. Firm commitments totaled $5.0 billion and $3.3 billion at December 31, 2008 and 2007,
respectively.
Interest rate Swaps: CSC uses Swaps to effectively convert the interest rate characteristics of a portion of its Medium-Term
Notes from fixed to variable. These Swaps are structured for CSC to receive a fixed rate of interest and pay a variable rate of
interest based on the three-month LIBOR rate. The variable interest rates reset every three months. Information on these
Swaps is summarized in the following table:
December 31, 2008 2007

Notional principal amount $ 200 $ 215
Weighted-average variable interest rate 4.94% 7.77%
Weighted-average fixed interest rate 8.05% 7.94%
Weighted-average maturity (in years) 1.2 2.0
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These Swaps have been designated as fair value hedges under SFAS No. 133, and are recorded on the Company’s
consolidated balance sheet at fair value. Changes in fair value of the Swaps are completely offset by changes in fair value of
the hedged Medium-Term Notes resulting in no effect on net income. At December 31, 2008 and 2007, CSC recorded a
derivative asset of $9 million and $6 million, respectively, for these Swaps. Concurrently, the carrying value of the Medium-
Term Notes was increased by $9 million and $6 million at December 31, 2008 and 2007, respectively.
Forward sale and interest rate lock commitments: Schwab Bank’s loans held for sale portfolio consists of fixed-rate and
adjustable-rate mortgages, which are subject to a loss in value when market interest rates rise. Schwab Bank uses forward sale
commitments to manage this risk. These forward sale commitments have been designated as cash flow hedging instruments,
and are recorded on the Company’s consolidated balance sheet at fair value with gains or losses recorded in other
comprehensive income (loss). Amounts included in other comprehensive income (loss) are reclassified into earnings when the
related loan is sold. At both December 31, 2008 and 2007, the derivative asset and liability recorded by Schwab Bank for
these forward sale commitments were not material.
Additionally, Schwab Bank uses forward sale commitments to hedge interest rate lock commitments issued on mortgage loans
that will be held for sale. Schwab Bank considers the fair value of these commitments to be zero at the commitment date, with
subsequent changes in fair value determined solely based on changes in market interest rates. Any changes in fair value of the
interest rate lock commitments are completely offset by changes in fair value of the related forward sale commitments.
Schwab Bank had interest rate lock commitments on mortgage loans to be held for sale with principal balances totaling
approximately $452 million and $131 million at December 31, 2008 and 2007, respectively. At both December 31, 2008 and
2007, the derivative asset and liability recorded by Schwab Bank for these interest rate lock commitments and the related
forward sale commitments were not material.
15. Fair Values of Assets and Liabilities
SFAS No. 157 defines fair value as the price that would be received to sell an asset or the price paid to transfer a liability in
an orderly transaction between market participants at the measurement date. SFAS No. 157 also establishes a hierarchy for
disclosing assets and liabilities measured at fair value based on the inputs used to value them. The fair value hierarchy
maximizes the use of observable inputs and minimizes the use of unobservable inputs. Observable inputs are based on market
pricing data obtained from sources independent of the Company. A quoted price in an active market provides the most
reliable evidence of fair value and is generally used to measure fair value whenever available. Unobservable inputs reflect
management’s judgment about the assumptions market participants would use in pricing the asset or liability. Where inputs
used to measure fair value of an asset or liability are from different levels of the hierarchy, the asset or liability is categorized
based on the lowest level input that is significant to the fair value measurement in its entirety. Assessing the significance of a
particular input requires judgment. The fair value hierarchy includes three levels based on the objectivity of the inputs as
follows:
 Level 1 inputs are quoted prices in active markets as of the measurement date for identical assets or liabilities that the
Company has the ability to access. This category includes active exchange-traded money market funds, mutual
funds, and equity securities.
 Level 2 inputs are inputs other than quoted prices included in Level 1 that are observable for the asset or liability,
either directly or indirectly. Level 2 inputs include quoted prices for similar assets and liabilities in active markets,
and inputs other than quoted prices that are observable for the asset or liability, such as interest rates and yield curves
that are observable at commonly quoted intervals. This category includes mortgage-backed securities, asset-backed
securities, corporate debt securities, certificates of deposit, commercial paper, U.S. agency and municipal debt
securities, U.S. Treasury securities, and derivative contracts.
 Level 3 inputs are unobservable inputs for the asset or liability, and include situations where there is little, if any,
market activity for the asset or liability. The Company does not have any financial assets or liabilities utilizing
Level 3 inputs as of December 31, 2008.
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Assets and Liabilities Recorded at Fair Value
The Company’s assets recorded at fair value include certain investments segregated and on deposit for regulatory purposes,
other securities owned, and securities available for sale. The Company uses prices obtained from an independent third-party
pricing service to measure the fair value of certain investment securities. The Company validates prices received from the
pricing service using various methods including comparison to prices received from additional pricing services, comparison to
quoted market prices, where available, comparison to internal valuation models, and review of other relevant market data
including implied yields of major categories of securities. The Company does not adjust the prices received from the
independent third-party pricing service unless such prices are inconsistent with SFAS No. 157 and result in a material
difference in the recorded amounts. At December 31, 2008, the Company did not adjust prices received from the independent
third-party pricing service. To measure the fair value of certificates of deposits and treasury securities included in investments
segregated and on deposit for regulatory purposes, the Company uses discounted cash flow models that utilize market-based
inputs including observable market interest rates that correspond to the remaining maturities or next interest reset dates.
Liabilities recorded at fair value are not material.
The following table presents the Company’s fair value hierarchy as of December 31, 2008 for assets and liabilities measured
at fair value:
Quoted Prices
in Active Markets Significant Significant
for Identical Other Observable Unobservable
Assets Inputs Inputs Balance at
(Level 1) (Level 2) (Level 3) Fair Value
Assets
Investments segregated and on deposit for regulatory purposes $ - $ 6,829 $ - $ 6,829
Other securities owned 578 48 - 626
Securities available for sale - 14,446 - 14,446
Other assets (1) - 11 - 11
Total assets at fair value $ 578 $ 21,334 $ - $ 21,912
Liabilities
Accrued expenses and other liabilities (2) $ 2 $ 3 $ - $ 5
(1)
Other assets recorded at fair value include derivative contracts.
(2)
Accrued expenses and other liabilities include securities sold, not yet purchased, and derivative contracts.
Fair Value of Assets and Liabilities Not Recorded at Fair Value
Descriptions of the valuation methodologies used to estimate the fair value of assets and liabilities not recorded at fair value,
are as follows:
Cash and cash equivalents, receivables, deposits from banking clients, payables, and accrued expenses and other liabilities
include cash and highly liquid investments, receivables and payables from/ to brokers, dealers and clearing organizations,
receivables and payables from/ to brokerage clients, interest and non-interest bearing deposits from banking clients, and
drafts, accounts, taxes, interest, and compensation payable. Assets and liabilities in these categories are short-term in nature
and accordingly are recorded at amounts that approximate fair value.
Cash and investments segregated and on deposit for regulatory purposes include securities purchased under resale
agreements. Securities purchased under resale agreements are recorded at par value plus accrued interest. Securities purchased
under resale agreements are short-term in nature and are backed by collateral that both exceeds the carrying value of the resale
agreement and is highly liquid in nature. Accordingly, the carrying value approximates fair value.
Securities held to maturity include asset-backed securities collateralized by credit card and student loans. Securities held to
maturity are recorded at amortized cost. The fair value of these securities is obtained using an independent third-party pricing
service, as discussed above.
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Loans to banking clients primarily include adjustable-rate first-mortgage and HELOC loans. Loans to banking clients are
recorded at carrying value net of an allowance for credit losses. The fair value of the Company’s loans to banking clients is
estimated based on market prices for mortgage-backed securities collateralized by similar types of loans.
Loans held for sale include fixed rate first-mortgage and HELOC loans. Loans held for sale are recorded at the lower of cost
or market value. The fair value of the Company’s loans held for sale is estimated using quoted market prices for securities
backed by similar types of loans.
Long-term debt includes medium term notes, junior subordinated notes, and a finance lease obligation. The fair value of the
Company’s long-term debt is estimated using indicative, non-binding quotes from independent brokers.
Firm commitments to extend credit: The Company extends credit to banking clients through HELOC commitments. The
Company considers the fair value of unused HELOC commitments to be not material because the interest rate earned on
HELOC outstanding balances is based on the Prime rate and resets monthly. Future utilization of HELOC commitments will
earn a then current market interest rate. The Company does not charge a fee to maintain a HELOC.
The table below presents the Company’s fair value estimates as of December 31, 2008 and 2007 for financial instruments
excluding short-term financial assets and liabilities, for which carrying amounts approximate fair value, and excluding
financial instruments recorded at fair value.
2008 2007
Carrying Fair Carrying Fair
December 31, Amount Value Amount Value
Financial Assets:
Securities held to maturity $ 243 $ 244 $ - $ -
Loans to banking clients – net $ 6,044 $ 5,389 $ 3,443 $ 3,422
Loans held for sale $ 41 $ 42 $ 44 $ 45
Financial Liabilities:
Long-term debt $ 883 $ 705 $ 899 $ 908
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16. Accumulated Other Comprehensive Loss
Accumulated other comprehensive loss represents cumulative gains and losses that are not reflected in earnings. The
components of other comprehensive (loss) income are as follows:
2008 2007 2006

Before Tax Net of Before Tax Net of Before Tax Net of
tax effect tax tax effect tax tax effect tax
Net unrealized (loss) gain arising
during the year $ (955) $ 374 $ (581) $ (29) $ 12 $ (17) $ 9 $ (2) $ 7
Reclassification of realized losses
to earnings 75 (29) 46 59 (25) 34 - - -
Net unrealized (loss) gain on securities
available for sale (880) 345 (535) 30 (13) 17 9 (2) 7
Net unrealized loss on cash flow
hedging instruments - - - (6) 3 (3) (9) 3 (6)
Minimum pension liability adjustment - - - 9 (4) 5 - - -
Foreign currency translation adjustment (1) - (1) - - - 1 - 1
Other comprehensive (loss) income $ (881) $ 345 $ (536) $ 33 $ (14) $ 19 $ 1 $ 1 $ 2
Accumulated other comprehensive loss balances were:
Foreign Net unrealized Net unrealized Total accumulated

currency (loss) gain on gain (loss) on cash Minimum other
translation securities flow hedging pension liability comprehensive
adjustment available for sale instruments adjustment loss
Balance at December 31, 2005 $ - $ (42) $ 9 $ - $ (33)
Net change 1 7 (6) - 2
Adjustment to initially apply
SFAS No. 158, net of tax - - - (5) (5)
Balance at December 31, 2006 1 (35) 3 (5) (36)
Net change - 17 (3) 5 19
Balance at December 31, 2007 1 (18) - - (17)
Net change (1) (535) - - (536)
Balance at December 31, 2008 $ - $ (553) $ - $ - $ (553)
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17. Employee Incentive, Deferred Compensation, and Retirement Plans
A summary of the Company’s stock-based compensation expense and related income tax benefit is as follows:
2008 2007 2006

Stock option expense $ 28 $ 18 $ 16
Restricted stock expense 38 38 23
Employee stock purchase plan expense 3 2 -
Total stock-based compensation expense (1) $ 69 $ 58 $ 39
Income tax benefit on stock-based compensation expense $ (27) $ (23) $ (15)
(1)
Total stock-based compensation expense including discontinued operations was $80 million and $52 million in 2007 and
2006, respectively.
The Company issues shares for stock options and restricted stock awards from treasury stock. At December 31, 2008, the
Company was authorized to grant up to 32 million common shares under its existing stock incentive plans.
As of December 31, 2008, there was $143 million of total unrecognized compensation cost, net of forfeitures, related to
outstanding stock option and restricted stock awards, which is expected to be recognized through 2013 with a remaining
weighted-average period of 3.1 years.
Stock Option Plans
The Company’s stock incentive plans provide for granting options to employees, officers, and directors. Options are granted
for the purchase of shares of common stock at an exercise price not less than market value on the date of grant, and expire
within seven or ten years from the date of grant. Options generally vest annually over a three- to four-year period from the
date of grant. Certain options are granted at an exercise price above the market value of common stock on the date of grant
(i.e., premium-priced options).
The Company's stock option activity (including options held by employees of discontinued operations) is summarized below:
Weighted-
Weighted- Average
Average Remaining Aggregate
Number Exercise Price Contractual Intrinsic
of Options per Share Life (in years) Value
Outstanding at December 31, 2007 63 $ 17.30
Granted 8 $ 19.92
Exercised (12) $ 11.10
Forfeited (1) $ 21.04
Expired (2) $ 26.25
Outstanding at December 31, 2008 56 $ 18.48 4.13 $ 90
Vested and expected to vest at December 31, 2008 53 $ 18.35 3.94 $ 90
Vested and exercisable at December 31, 2008 40 $ 17.53 2.80 $ 90
The aggregate intrinsic value in the table above represents the difference between CSC’s closing stock price and the exercise
price of each in-the-money option on the last trading day of the period presented.
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Information on stock options granted and exercised during the years is presented below:

Weighted-average fair value of options granted per share $ 7.94 $ 7.06 $ 5.43
Cash received from options exercised $ 131 $ 414 $ 252
Tax benefit realized on options exercised $ 48 $ 97 $ 57
Aggregate intrinsic value of options exercised $ 127 $ 244 $ 149
Management uses a binomial option pricing model to estimate the fair value of options granted. The binomial model takes
into account the contractual term of the stock option, expected volatility, dividend yield, and risk-free interest rate. Expected
volatility is based on the implied volatility of publicly-traded options on CSC’s stock. Dividend yield is based on the average
historical CSC dividend yield. The risk-free interest rate is based on the yield of a U.S. Treasury zero-coupon issue with a
remaining term equal to the contractual term of the option. Management uses historical option exercise data, which includes
employee termination data to estimate the probability of future option exercises. Management uses the Black-Scholes model
to solve for the expected life of options valued with the binomial model presented below. The assumptions used to value the
Company’s options and their expected life were as follows:
2008 2007 2006

Weighted-average expected dividend yield .51% .46% .46%
Weighted-average expected volatility 44% 35% 29%
Weighted-average risk-free interest rate 3.9% 4.2% 4.7%
Expected life (in years) 2.7 – 5.0 2.8 – 7.2 2.5 – 5.8
Restricted Stock Plans
The Company’s stock incentive plans provide for granting restricted stock awards to employees, officers, and directors.
Restricted stock awards are restricted from transfer or sale and generally vest annually over a three- to four-year period, but
some vest based upon the Company achieving certain financial or other measures. The fair value of restricted stock awards is
based on the market price of the Company’s stock on the date of grant and is generally amortized to restricted stock expense
on a straight-line basis over the requisite service period. The total fair value of the restricted stock awards (including awards
held by employees of discontinued operations in 2007 and 2006) that vested during each of the years 2008, 2007, and 2006
was $41 million, $96 million, and $55 million, respectively.
The Company’s restricted stock awards activity is summarized below:
Weighted-
Average Grant
Number Date Fair Value
of Shares per Share
Granted 2 $ 19.66
Vested (2) $ 16.44
Forfeited - $ -
Employee Stock Purchase Plan
Under the Company’s Employee Stock Purchase Plan (ESPP), eligible employees can purchase shares of CSC’s common
stock using amounts withheld through payroll deductions subject to limitations. Payroll deductions are accumulated during six
month offering periods that start each year on February 1st and August 1st. The purchase price for each share of common stock
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is 85% of the fair market value of the shares on the last trading day of the offering period. At December 31, 2008, the
Company had 49 million shares reserved for future issuance under the ESPP.
Long-term Incentive Plans
Eligible officers received LTIP units under the Company’s long-term incentive program. These awards are restricted from
transfer or sale and generally vest annually over a three- to four-year performance period. The cash payout of the LTIP units,
which may range from $0 to $4 per unit, are made following the end of the performance period based upon the Company
achieving certain cumulative EPS levels. The last performance period on existing grants under this incentive program ended
on December 31, 2008.
LTIP unit information (including units held by employees of discontinued operations) is as follows:
2008 2007 2006

LTIP units outstanding at year end 33 72 117
LTIP unit compensation expense $ 19 $ 88 $ 78
LTIP liability at year end $ 90 $ 190 $ 140
Other Deferred Compensation Plans

The Company sponsors deferred compensation plans for eligible officers and non-employee directors. The Company’s
deferred compensation plan for officers permits participants to defer the payment of certain cash compensation. The deferred
compensation liability was $121 million and $155 million at December 31, 2008 and 2007, respectively. The Company’s
deferred compensation plan for non-employee directors permits participants to defer receipt of all or a portion of their
directors’ fees and to receive either a grant of stock options, or upon ceasing to serve as a director, the number of shares of
CSC’s common stock that would have resulted from investing the deferred fee amount into CSC’s common stock.
Retirement Plan
Eligible employees of the Company who have met certain service requirements may participate in the Company’s qualified
retirement plan, the SchwabPlan® Retirement Savings and Investment Plan. The Company may match certain employee
contributions or make additional contributions to this plan at its discretion. The Company’s total contribution expense was
$53 million in 2008, $52 million in 2007, and $47 million in 2006.
18. Taxes on Income
Income tax expense on income from continuing operations is as follows:
2008 2007 2006

Current:
Federal $ 584 $ 441 $ 505
State 117 117 111
Total current 701 558 616
Deferred:
Federal 79 144 (25)
State 18 31 (6)
Total deferred 97 175 (31)
Taxes on income $ 798 $ 733 $ 585
The excess tax benefits from the exercise of stock options and the vesting of restricted stock awards, which for accounting
purposes are recorded in additional paid-in capital, were $50 million, $108 million, and $64 million in 2008, 2007, and 2006,
respectively.
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Income tax expense from discontinued operations was $18 million in 2008 and related to the determination of the final
income tax gain on the sale of U.S. Trust. The net income tax expense from discontinued operations was $691 million in 2007
and included $763 million of income tax expense related to income from discontinued operations and the gain on sale of
U.S. Trust and a $72 million income tax benefit related to the excess of the tax basis of U.S. Trust stock over book basis. The
net income tax benefit from discontinued operations was $134 million in 2006 and included a $205 million income tax benefit
related to the excess of the tax basis of U.S. Trust stock over the book basis.
The temporary differences that created deferred tax assets and liabilities are detailed below:
December 31, 2008 2007

Deferred tax assets:
Employee compensation, severance, and benefits $ 97 $ 163
Facilities lease commitments 70 89
State and local taxes 30 39
Reserves and allowances 36 27
Unrealized loss on securities available for sale – net 357 12
Deferred income 3 7
Other 3 3
Total deferred tax assets 596 340
Deferred tax liabilities:
Capitalized internal-use software development costs (52) (53)
Depreciation and amortization (21) (15)
Deferred loan costs (21) (14)
Other - (4)
Total deferred tax liabilities (94) (86)
Deferred tax asset – net $ 502 $ 254
The Company determined that no valuation allowance against deferred tax assets at December 31, 2008 and 2007 was
necessary.
The effective income tax rate on income from continuing operations differs from the amount computed by applying the
federal statutory income tax rate as follows:
2008 2007 2006

Federal statutory income tax rate 35.0% 35.0% 35.0%
State income taxes, net of federal tax benefit 4.4 5.3 4.6
Other (0.1) (0.7) -
Effective income tax rate 39.3% 39.6% 39.6%
The effective income tax rate including discontinued operations was 40.2% in 2008, 37.2% in 2007, and 26.9% in 2006. The
difference between the effective income tax rate on income from continuing operations and the effective income tax rate
including discontinued operations was primarily due to the $18 million income tax expense in 2008, and the $72 million and
$205 million income tax benefits in 2007 and 2006, respectively, discussed above.
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The Company’s unrecognized tax benefits, which are included in accrued expenses and other liabilities, represent the
difference between positions taken on tax return filings and the requirements under FIN No. 48 to consider potential tax
settlement outcomes. Resolving these uncertain tax matters in the Company’s favor would reduce income tax expense from
continuing operations by $8 million, net of federal tax benefit. A reconciliation of the beginning and ending amount of
unrecognized tax benefits is as follows:
2008 2007
Balance at beginning of year $ 7 $ 20
Additions based on tax provisions related to the current year - -
Additions for tax positions of prior years 8 3
Reductions for tax positions of prior years (1) (2) (16)
Settlements (1) -
Balance at end of year $ 12 $ 7
(1)
Amount in 2007 relates to the sale of U.S. Trust.
The Company recognizes interest and penalties related to unrecognized tax benefits in taxes on income. Interest charges for
the year ended December 31, 2008 and 2007 were not material. At December 31, 2008 and 2007, the Company had a liability
for estimated interest on the unrecognized tax benefits of $3 million and $3 million, respectively.
CSC and its subsidiaries file income tax returns in the federal jurisdiction, as well as most state and applicable local
jurisdictions and are subject to routine examinations by the respective taxing authorities. Federal return audits have been
completed through 2005.
19. Earnings Per Share
Basic EPS is computed by dividing net income by the weighted-average number of common shares outstanding for the
period. Diluted EPS is computed by dividing net income by the weighted-average number of common shares plus the effect of
dilutive potential common shares outstanding for the period using the treasury stock method. Dilutive potential common
shares include outstanding stock options and unvested restricted stock awards. EPS under the basic and diluted computations
are as follows:
2008 2007 2006

Net income $ 1,212 $ 2,407 $ 1,227
Weighted-average common shares outstanding — basic 1,148 1,208 1,270
Common stock equivalent shares related to stock incentive plans 9 14 16
Weighted-average common shares outstanding — diluted (1) 1,157 1,222 1,286
Basic EPS:
Net income $ 1.06 $ 1.99 $ .97
Diluted EPS:
Net income $ 1.05 $ 1.97 $ .95
(1)
Total antidilutive stock options and restricted stock awards excluded from the calculation of diluted earnings per share
were 33 million, 39 million, and 35 million shares for the years ended December 31, 2008, 2007, and 2006, respectively.
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20. Regulatory Requirements
CSC is a savings and loan holding company and Schwab Bank, CSC’s depository institution subsidiary, is a federal savings
bank. CSC and Schwab Bank are both subject to supervision and regulation by the Office of Thrift Supervision (OTS). As a
savings and loan holding company, CSC is not subject to specific statutory capital requirements. However, CSC is required to
maintain capital that is sufficient to support the holding company and its subsidiaries’ business activities, and the risks
inherent in those activities.
Schwab Bank is subject to regulation and supervision and to various requirements and restrictions under federal and state
laws, including regulatory capital guidelines. Among other things, these requirements govern transactions with CSC and its
non-depository institution subsidiaries, including loans and other extensions of credit, investments or asset purchases,
dividends and investments. The federal banking agencies have broad powers to enforce these regulations, including the power
to terminate deposit insurance, impose substantial fines and other civil and criminal penalties, and appoint a conservator or
receiver. Under the Federal Deposit Insurance Act, Schwab Bank could be subject to restrictive actions if it were to fall within
one of the lowest three of five capital categories. Schwab Bank is required to maintain a capital level that at least equals
minimum capital levels specified in federal banking laws and regulations. Failure to meet the minimum levels will result in
certain mandatory, and possibly additional discretionary, actions by the regulators that, if undertaken, could have a direct
material effect on Schwab Bank. At December 31, 2008, CSC and Schwab Bank met all the above requirements.
The regulatory capital and ratios for Schwab Bank are as follows:
Minimum Capital Minimum to be

Actual Requirement Well Capitalized
Amount Ratio Amount Ratio Amount Ratio
December 31, 2008
Tier 1 Capital $ 1,650 15.3% $ 432 4.0% $ 647 6.0%
Total Capital $ 1,671 15.5% $ 863 8.0% $ 1,079 10.0%
Leverage $ 1,650 6.4% $ 1,037 4.0% $ 1,296 5.0%
Tangible Equity $ 1,650 6.4% $ 518 2.0% N/A
December 31, 2007
Tier 1 Capital $ 861 12.9% $ 268 4.0% $ 402 6.0%
Total Capital $ 869 13.0% $ 535 8.0% $ 669 10.0%
Leverage $ 861 5.8% $ 591 4.0% $ 739 5.0%
Tangible Equity $ 861 5.8% $ 296 2.0% N/A
N/A Not applicable.
Based on its regulatory capital ratios at December 31, 2008 and 2007, Schwab Bank is considered well capitalized (the
highest category) pursuant to banking regulatory guidelines. There are no conditions or events that management believes have
changed Schwab Bank’s well-capitalized status.
The Board of Governors of the Federal Reserve System requires Schwab Bank to maintain reserve balances at the Federal
Reserve Bank based on certain deposit levels. Schwab Bank’s average reserve requirement was $284 million in 2008 and
$68 million in 2007.
Schwab is subject to Rule 15c3-1 under the Securities Exchange Act of 1934 (the Uniform Net Capital Rule). Schwab
computes net capital under the alternative method permitted by the Uniform Net Capital Rule. This method requires the
maintenance of minimum net capital, as defined, of the greater of 2% of aggregate debit balances arising from client
transactions or a minimum dollar requirement, which is based on the type of business conducted by the broker-dealer. At
December 31, 2008, 2% of aggregate debits was $156 million, which exceeded the minimum dollar requirement for Schwab
of $250,000. At December 31, 2008, Schwab’s net capital was $1.2 billion (16% of aggregate debit balances), which was
$1.1 billion in excess of its minimum required net capital and $840 million in excess of 5% of aggregate debit balances.
Under the alternative method, a broker-dealer may not repay subordinated borrowings, pay cash dividends, or make any
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unsecured advances or loans to its parent or employees if such payment would result in net capital of less than 5% of
aggregate debit balances or less than 120% of its minimum dollar requirement.
Schwab is also subject to Rule 15c3-3 under the Securities Exchange Act of 1934, which requires Schwab to maintain cash or
qualified securities in a segregated reserve account for the exclusive benefit of clients. In accordance with Rule 15c3-3,
Schwab had portions of its cash and investments segregated for the exclusive benefit of clients at December 31, 2008.
Amounts included in cash and investments segregated and on deposit for regulatory purposes represent actual balances on
deposit, whereas cash and investments required to be segregated and on deposit for regulatory purposes at December 31, 2008
and 2007 were $14.5 billion and $10.2 billion respectively. On January 5, 2009 and January 3, 2008, the Company deposited
a net amount of $216 million and $1.7 billion, respectively, into its segregated reserve bank accounts.
21. Segment Information
Operating segments are defined as components of a company in which separate financial information is evaluated regularly by
the chief operating decision maker, or decision-making group, in deciding how to allocate resources and in assessing
performance. The Company structures its operating segments according to its various types of clients and the services
provided to those clients. The Company’s three reportable segments are Investor Services (formerly called Schwab Investor

Services), Advisor Services (formerly called Schwab Institutional ), and Corporate and Retirement Services (formerly called
Schwab Corporate and Retirement Services).
The Investor Services segment includes the Company’s retail brokerage and banking operations. The Advisor Services
segment provides custodial, trading, and support services to independent investment advisors. The Corporate and Retirement
Services segment provides retirement plan services, plan administrator services, stock plan services, and mutual fund clearing
services and supports the availability of Schwab proprietary mutual funds on third-party platforms.
The accounting policies of the segments are the same as those described in note “2 – Summary of Significant Accounting
Policies.” Financial information for the Company’s reportable segments is presented in the following table. For the
computation of its segment information, the Company utilizes an activity-based costing model to allocate traditional income
statement line item expenses (e.g., compensation and benefits, depreciation, and professional services) to the business
activities driving segment expenses (e.g., client service, opening new accounts, or business development) and a funds transfer
pricing methodology to allocate certain revenues.
The Company evaluates the performance of its segments on a pre-tax basis excluding items such as restructuring charges,
impairment charges on non-financial assets, discontinued operations, and extraordinary items. Assets are not disclosed
because the balances are not used for evaluating segment performance and deciding how to allocate resources to segments.
However, capital expenditures are used in resource allocation and are therefore disclosed. There are no revenues from
transactions with other segments within the Company. Capital expenditures are reported gross, as opposed to net of proceeds
from the sale of fixed assets.
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Financial information for the Company’s reportable segments is presented in the following table:

Net revenues:
Investor Services $ 3,385 $ 3,352 $ 2,940
Advisor Services 1,250 1,121 966
Corporate & Retirement Services 504 506 373
Unallocated and other 11 15 30
Total net revenues $ 5,150 $ 4,994 $ 4,309
Net interest revenue:
Investor Services $ 1,383 $ 1,337 $ 1,179
Advisor Services 207 229 204
Unallocated and other 1 (5) (9)
Total net interest revenue $ 1,665 $ 1,647 $ 1,434
Income from continuing operations before taxes on income:
Investor Services $ 1,278 $ 1,237 $ 958
Unallocated and other (3) (5) 9
Income from continuing operations before taxes on income: 2,028 1,853 1,476
Taxes on income (798) (733) (585)
(Loss) income from discontinued operations, net of tax (18) 1,287 336
Net Income $ 1,212 $ 2,407 $ 1,227
Capital expenditures:
Investor Services $ 125 $ 111 $ 82
Unallocated and other 1 3 -
Total capital expenditures $ 196 $ 168 $ 122
Depreciation and amortization:
Investor Services $ 100 $ 98 $ 117
Unallocated and other - 18 4
Total depreciation and amortization $ 152 $ 156 $ 157
Fees received from Schwab’s proprietary mutual funds represented approximately 24% of the Company’s consolidated net
revenues in 2008, 23% in 2007, and 22% in 2006. Except for Schwab’s proprietary mutual funds, which are considered a
single client for purposes of this computation, no single client accounted for more than 10% of the Company’s consolidated
net revenues in 2008, 2007, or 2006. Substantially all of the Company’s revenues and assets are generated or located in the
U.S. The percentage of Schwab’s total client accounts located in California was approximately 24%, 24%, and 25% at
December 31, 2008, 2007, and 2006, respectively.
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Net revenues categorized by similar products and services are shown in the following table:

Mutual fund service fees $ 1,917 $ 1,892 $ 1,563
Investment management and trust fees 340 378 310
Other asset management and administration fees 98 88 72
Interest revenue:
Cash and cash equivalents 129 223 125
Cash and investments segregated 280 511 602
Receivables from brokers, dealers and clearing organizations 8 27 25
Receivables from brokerage clients 612 859 837
Securities available for sale 517 399 319
Securities held to maturity 1 - -
Loans to banking clients 227 169 128
Other 134 82 77
Commissions 915 755 703
Principal transactions 165 105 82
Other 50 129 145
Total net revenues $ 5,150 $ 4,994 $ 4,309
The carrying amount of goodwill is allocated to the Company’s reportable segments for purposes of testing goodwill for
impairment as presented in the following table:
December 31, 2008 2007

Investor Services $ 416 $ 416
Advisor Services 3 -
Corporate and Retirement Services 109 109
Total goodwill $ 528 $ 525
22. Capital Restructuring
In 2007, CSC completed a capital restructuring that returned approximately $3.3 billion in capital to stockholders to create a
more efficient and cost-effective capital structure. The capital restructuring included the following components:
 CSC paid a special cash dividend of $1.00 per common share, which returned $1.2 billion to stockholders. The
special dividend was paid on August 24, 2007 to stockholders of record on July 24, 2007.
 CSC repurchased 84 million shares of its common stock through a modified “Dutch Auction” tender offer in August
2007. The tender offer period closed on July 31, 2007 and CSC accepted for purchase 84 million shares of its
common stock, at a purchase price of $20.50 per share, for a total purchase price of $1.7 billion.
 CSC executed a separate Stock Purchase Agreement with Chairman and former CEO Charles R. Schwab, CSC’s
largest stockholder, and with certain additional stockholders whose shares Mr. Schwab was deemed to beneficially
own. Under the Stock Purchase Agreement, Mr. Schwab and the other stockholders who are parties to the agreement
did not participate in the tender offer, but instead, sold, and CSC purchased, 18 million shares, at a purchase price
($20.50 per share), which is the same as was determined and paid in the tender offer, for a total purchase price of
$369 million. The number of shares repurchased resulted in Mr. Schwab maintaining the same beneficial ownership
percentage in CSC’s outstanding common stock that he had prior to the tender offer and sale of shares pursuant to
the Stock Purchase Agreement (approximately 18 percent, which does not take into consideration Mr. Schwab’s
outstanding options to acquire stock). The shares under this agreement were repurchased on August 15, 2007.
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 CSC issued $250 million of 6.375% Senior Medium-Term Notes due in 2017 in September 2007 and $300 million of
junior subordinated notes in October 2007. See note “12 – Borrowings” for further discussion of the issuance of the
junior subordinated notes.
23. Business Acquisition
On March 31, 2007, the Company completed its acquisition of The 401(k) Company, which offers retirement plan services,
for $115 million in cash. The acquisition enhanced the Company’s ability to meet the needs of retirement plans of all sizes, as
well as provided the opportunity to capture rollover accounts from individuals participating in retirement plans served by The
401(k) Company and to cross-sell the Company’s other investment and banking services to plan participants. The Company’s
consolidated financial statements include The 401(k) Company as a wholly-owned subsidiary of CSC from March 31, 2007.
Pro-forma financial information for The 401(k) Company is not presented as it is not material to the Company’s consolidated
financial statements. As a result of a purchase price allocation, the Company recorded goodwill of $106 million and intangible
assets of $8 million, both of which are deductible for tax purposes over a period of 15 years. The intangible assets, which
relate to customer relationships, are being amortized on a straight-line basis over 16 years. The goodwill was allocated to the
Corporate and Retirement Services segment.
24. Discontinued Operations
On July 1, 2007, the Company completed the sale of all of the outstanding common stock of U.S. Trust for $3.3 billion in
cash. The components of (loss) income from discontinued operations related to U.S. Trust are as follows:
2008 2007 2006

Net revenues $ - $ 446 $ 892
(1)
Income from discontinued operations, before taxes $ - $ 116 $ 197
Gain on sale of U.S. Trust, before taxes - 1,862 -
Tax (expense) benefit on income (18) (691) 136
(Loss) income from discontinued operations, net of tax (1) $ (18) $ 1,287 $ 333
(1)
Includes $6 million pre-tax, or $4 million after tax, of transaction-related costs recorded in 2006.
When calculating the Company’s gain on the sale of U.S. Trust for income tax purposes, the acquisition date tax basis is the
basis of U.S. Trust’s prior stockholders in their shares as of the date U.S. Trust was acquired by the Company, since the
transaction qualified as a tax-free exchange. In 2006, the Company recorded a $205 million income tax benefit related to the
estimated difference between the tax and book bases of the Company’s U.S. Trust stock. This amount was included in income
from discontinued operations, net of tax, on the Company’s consolidated statements of income. This initial estimate of the tax
benefit was based on publicly available information, including information on the composition of U.S. Trust’s stockholders at
the acquisition date and the market price of U.S. Trust stock during relevant periods, and was subject to adjustment following
a survey of former U.S. Trust stockholders. The Company completed the survey in the third quarter of 2007. Based upon the
results of this survey, the Company recorded an additional $72 million income tax benefit in 2007. The IRS completed their
examination of the acquisition date tax basis under a pre-filing agreement in the second quarter of 2008. In connection with
the determination of the final income tax gain on the sale of U.S. Trust, the Company recorded additional tax expense of
$18 million in the second quarter of 2008. This amount was recorded in loss from discontinued operations.
In May 2007, Schwab terminated an arrangement with U.S. Trust by which the excess cash held in certain Schwab brokerage
client accounts was swept into a money market deposit account at U.S. Trust. Schwab moved all of these balances to a similar
existing arrangement with Schwab Bank. The interest expense related to these client deposit balances maintained at U.S. Trust
is included in interest expense from continuing operations on the Company's consolidated statements of income for 2007 and
2006. This interest expense was $4 million and $11 million for 2007 and 2006, respectively. The corresponding interest
revenue on the invested cash balances related to these deposits is included in interest revenue from continuing operations on
the Company's consolidated statements of income for 2007 and 2006. This interest revenue was $14 million and $38 million
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for 2007 and 2006, respectively. The interest revenue amount was calculated using the Company’s funds transfer pricing
methodology.
25. Restructuring Reserve
A summary of the activity in the facilities restructuring reserve related to the Company’s past restructuring initiatives, as well
as certain restructuring-related obligations, is as follows:
December 31, 2008 2007 2006

Balance at beginning of year $ 77 $ 112 $ 151
Restructuring credit (3) (5) (3)
Cash payments - net (21) (34) (41)
Other 2 4 5
Balance at end of year (1) $ 55 $ 77 $ 112
(1)
As of December 31, 2008, the Company expects to substantially utilize the remaining facilities restructuring reserve
through cash payments for the net lease expense over the respective lease terms through 2017.
All restructuring reserve liabilities are included in accrued expenses and other liabilities.
The actual costs of these restructuring initiatives could differ from the estimated costs, depending primarily on the Company’s
sublease activities at the properties.
26. The Charles Schwab Corporation – Parent Company Only Financial Statements
Condensed Statements of Income
Year ended December 31, 2008 2007 2006

Interest revenue $ 27 $ 68 $ 44
Net interest revenue (27) 34 13
Other revenues 9 13 21
Other expenses 7 (20) (16)
(Loss) income before income tax benefit (expense) and equity in
earnings of subsidiaries (11) 27 18
Income tax benefit (expense) 2 (9) (8)
(Loss) income from continuing operations before equity in earnings of
subsidiaries (9) 18 10
Equity in earnings of subsidiaries:
Equity in undistributed earnings of subsidiaries 251 548 48
Dividends from banking subsidiary - 65 -
Dividends from non-banking subsidiaries 988 489 833
Income from continuing operations 1,230 1,120 891
Equity in undistributed earnings of subsidiaries – discontinued operations - 32 107
Dividends from discontinued operation - 40 25
Tax (expense) benefit from discontinued operations (18) (657) 206
Income (loss) from discontinued operations - 1,872 (2)
Net Income $ 1,212 $ 2,407 $ 1,227
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Condensed Balance Sheets
December 31, 2008 2007

Assets
Cash and cash equivalents $ 755 $ 827
Receivables from brokers, dealers, and clearing organizations 34 -
Receivables from subsidiaries 81 70
Other securities owned – at fair value 109 92
Loans to non-banking subsidiaries 373 220
Investment in non-banking subsidiaries 2,437 2,637
Investment in banking subsidiary 1,096 850
Equipment, office facilities, and property – net 6 5
Other assets 133 129
Total $ 5,024 $ 4,830
Liabilities and Stockholders’ Equity
Accrued expenses and other liabilities $ 178 $ 246
Payables to subsidiaries 19 74
Long-term debt 766 778
Total liabilities 963 1,098
Stockholders’ equity 4,061 3,732
Total $ 5,024 $ 4,830
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Condensed Statements of Cash Flows
Year ended December 31, 2008 2007 2006

Cash Flows from Operating Activities
Net income $ 1,212 $ 2,407 $ 1,227
Adjustments to reconcile net income to net cash provided
by operating activities:
Loss (gain) from discontinued operations, net of tax 19 (1,215) 1
Equity in undistributed earnings of subsidiaries (251) (548) (51)
Equity in undistributed earnings of subsidiaries –
discontinued operations - (32) (107)
Excess tax benefits from stock-based compensation (50) (108) (64)
Provision for deferred income taxes 48 192 (192)
Other 2 (6) (17)
Net change in:
Receivables from brokers, dealers, and clearing organizations (34) - -
Other securities owned (17) - -
Other assets (52) 52 (10)
Accrued expenses and other liabilities (85) (647) 80
Net cash provided by operating activities 792 95 867
Cash Flows from Investing Activities
Due (to) from subsidiaries – net (94) 122 54
Purchase of equipment, office facilities, and property (2) (5) -
(Increase) decrease in investments in subsidiaries (330) 14 22
Cash payments for business combinations
and investments, net of cash received - (116) (8)
Proceeds from sale of subsidiary - 3,237 -
Net cash (used for) provided by investing activities (426) 3,252 68
Cash Flows from Financing Activities
Issuance of long-term debt - 549 -
Repayment of long-term debt (15) (38) (68)
Excess tax benefits from stock-based compensation 50 108 64
Dividends paid (253) (1,500) (173)
Purchase of treasury stock (350) (2,742) (868)
Proceeds from stock options exercised and other 131 414 253
Other financing activities (1) (7) -
Net cash used for financing activities (438) (3,216) (792)
(Decrease) increase in Cash and Cash Equivalents (72) 131 143
Cash and Cash Equivalents at Beginning of Year 827 696 553
Cash and Cash Equivalents at End of Year $ 755 $ 827 $ 696
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27. Quarterly Financial Information (Unaudited)
Fourth Third Second First

Quarter Quarter Quarter Quarter
Year Ended December 31, 2008:
Net Revenues $ 1,284 $ 1,251 $ 1,308 $ 1,307
Expenses Excluding Interest $ 777 $ 752 $ 794 $ 799
Net Income $ 308 $ 304 $ 295 $ 305
Weighted Average Common Shares – Diluted 1,158 1,158 1,154 1,159
Basic Earnings Per Share (1) $ .27 $ .26 $ .26 $ .27
Diluted Earnings Per Share (1) $ .27 $ .26 $ .26 $ .26
Dividends Declared Per Common Share $ .06 $ .06 $ .05 $ .05
Range of Common Stock Price Per Share:
High $ 24.37 $ 26.00 $ 22.78 $ 24.78
Low $ 14.59 $ 18.78 $ 18.31 $ 18.04
Range of Price/Earnings Ratio (2):
High 23 25 11 12
Low 14 18 9 9
Year Ended December 31, 2007:
Net Revenues $ 1,345 $ 1,291 $ 1,205 $ 1,153
Expenses Excluding Interest $ 819 $ 779 $ 781 $ 762
Net Income $ 308 $ 1,534 $ 292 $ 273
Weighted Average Common Shares – Diluted 1,167 1,201 1,257 1,266
Basic Earnings Per Share (1) $ .27 $ 1.29 $ .24 $ .22
Diluted Earnings Per Share (1) $ .26 $ 1.28 $ .23 $ .22
Dividends Declared Per Common Share $ .05 $ 1.05 $ .05 $ .05
Range of Common Stock Price Per Share:
High $ 25.55 $ 22.48 $ 22.69 $ 20.35
Low $ 21.60 $ 17.90 $ 18.55 $ 17.76
Range of Price/Earnings Ratio (2):
High 13 11 22 21
Low 11 9 18 18
(1)
Both basic and diluted earnings per share include (loss) income from discontinued operations.
(2)
Price/earnings ratio is computed by dividing the high and low market prices by diluted earnings per share for the
preceding 12-month period ending on the last day of the quarter presented.
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Report of Independent Registered Public Accounting Firm
To the Board of Directors and Stockholders of The Charles Schwab Corporation:
We have audited the accompanying consolidated balance sheets of The Charles Schwab Corporation and subsidiaries (the Company) as of
December 31, 2008 and 2007, and the related consolidated statements of income, stockholders’ equity, and cash flows for each of the three
years in the period ended December 31, 2008. Our audits also included the financial statement schedule of the Company on page F-2. We
also have audited the Company’s internal control over financial reporting as of December 31, 2008, based on criteria established in Internal
Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. The Company’s
management is responsible for these financial statements and financial statement schedule, for maintaining effective internal control over
financial reporting, and for its assessment of the effectiveness of internal control over financial reporting included in Management’s Report
on Internal Control over Financial Reporting. Our responsibility is to express an opinion on these financial statements and financial
statement schedule and an opinion on the Company’s internal control over financial reporting based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of
material misstatement and whether effective internal control over financial reporting was maintained in all material respects. Our audits of
the financial statements included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement
presentation. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial
reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control
based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We
believe that our audits provide a reasonable basis for our opinions.
A company’s internal control over financial reporting is a process designed by, or under the supervision of, the company’s principal
executive and principal financial officers, or persons performing similar functions, and effected by the company’s board of directors,
management, and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over
financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately
and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are
recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles and that
receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the
company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of
the company’s assets that could have a material effect on the financial statements.
Because of the inherent limitations of internal control over financial reporting, including the possibility of collusion or improper
management override of controls, material misstatements due to error or fraud may not be prevented or detected on a timely basis. Also,
projections of any evaluation of the effectiveness of the internal control over financial reporting to future periods are subject to the risk that
the controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may
deteriorate.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the
Company as of December 31, 2008 and 2007, and the results of their operations and their cash flows for each of the three years in the
period ended December 31, 2008, in conformity with accounting principles generally accepted in the United States of America. Also, in our
opinion, such financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole,
presents fairly, in all material respects, the information set forth therein. Also, in our opinion, the Company maintained, in all material
respects, effective internal control over financial reporting as of December 31, 2008, based on the criteria established in Internal Control –
Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.
/s/ Deloitte & Touche LLP

San Francisco, California
February 24, 2009
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Management’s Report on Internal Control Over Financial Reporting
Management of The Charles Schwab Corporation, together with its subsidiaries (the Company), is responsible for establishing
and maintaining adequate internal control over financial reporting. The Company’s internal control over financial reporting is
a process designed under the supervision of and effected by the Company’s chief executive officer and chief financial officer
to provide reasonable assurance regarding the reliability of financial reporting and the preparation of published financial
statements in accordance with accounting principles generally accepted in the United States of America.
As of December 31, 2008, management conducted an assessment of the effectiveness of the Company’s internal control over
financial reporting based on the framework established in Internal Control – Integrated Framework issued by the Committee
of Sponsoring Organizations of the Treadway Commission. Based on this assessment, management has determined that the
Company’s internal control over financial reporting was effective as of December 31, 2008.
The Company’s internal control over financial reporting includes policies and procedures that pertain to the maintenance of
records that, in reasonable detail, accurately and fairly reflect transactions and dispositions of assets; provide reasonable
assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with
accounting principles generally accepted in the United States of America, and that receipts and expenditures are being made
only in accordance with authorizations of management and the directors of the Company; and provide reasonable assurance
regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could
have a material effect on the Company’s financial statements.
The Company’s internal control over financial reporting as of December 31, 2008 has been audited by Deloitte & Touche
LLP, an independent registered public accounting firm, as stated in their report appearing on the previous page.
- 82 -
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial

Disclosure
None.
Item 9A. Controls and Procedures
Evaluation of disclosure controls and procedures: The management of the Company, with the participation of the Company’s
Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the Company’s disclosure controls
and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934) as of December 31, 2008. Based on
this evaluation, the Company’s Chief Executive Officer and Chief Financial Officer have concluded that the Company’s
disclosure controls and procedures were effective as of December 31, 2008.
Changes in internal control over financial reporting: No change in the Company’s internal control over financial reporting
(as defined in Rule 13a-15(f) under the Securities Exchange Act of 1934) was identified during the quarter ended
December 31, 2008 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control
over financial reporting.
Management’s Report on Internal Control Over Financial Reporting and the Report of Independent Registered Public
Accounting Firm are included in “Item 8 – Financial Statements and Supplementary Data.”
Item 9B. Other Information
None.
PART III
Item 10. Directors, Executive Officers, and Corporate Governance
The information relating to directors of CSC required to be furnished pursuant to this item is incorporated by reference from
portions of the Company’s definitive proxy statement for its annual meeting of stockholders to be filed with the SEC pursuant
to Regulation 14A by April 30, 2009 (the Proxy Statement) under “The Board of Directors – Members of the Board of
Directors,” “The Board of Directors – Corporate Governance Information,” “The Board of Directors – Director
Nominations,” and “Section 16(a) Beneficial Ownership Reporting Compliance.” The Company’s Code of Conduct and
Business Ethics, applicable to directors and all employees, including senior financial officers, is available on the Company’s
website at www.aboutschwab.com/governance. If the Company makes any amendments to or grants any waivers from its
Code of Conduct and Business Ethics which are required to be disclosed pursuant to the Securities Exchange Act of 1934, the
Company will make such disclosures on this website.
- 83 -
Executive Officers of the Registrant
The following table provides certain information about each of the Company’s current executive officers.
Executive Officers of the Registrant
Name Age Title
Charles R. Schwab 71 Chairman
Walter W. Bettinger II 48 President and Chief Executive Officer
Jay L. Allen 52 Executive Vice President – Human Resources and Employee

Services
Benjamin L. Brigeman 46 Executive Vice President – Investor Services
Carrie E. Dwyer 58 Executive Vice President, General Counsel and Corporate

Secretary
Joseph R. Martinetto 46 Executive Vice President and Chief Financial Officer
James D. McCool 50 Executive Vice President – Institutional Services
Rebecca Saeger 53 Executive Vice President and Chief Marketing Officer
Mr. Schwab has been Chairman and a director of CSC since its incorporation in 1986. He also served as Chief Executive
Officer of CSC from 1986 to 1997, and as Co-Chief Executive Officer from 1998 until 2003. He was re-appointed Chief
Executive Officer in 2004 and served in that role until October 2008. Mr. Schwab is Chairman of Charles Schwab & Co.,
Inc., and Charles Schwab Bank, and a trustee of The Charles Schwab Family of Funds, Schwab Investments, Schwab Capital
Trust, and Schwab Annuity Portfolios, all registered investment companies.
Mr. Bettinger was named President and Chief Executive Officer of CSC and Schwab effective October 2008. Concurrent
with this appointment, he was named to the Board of Directors of CSC. Mr. Bettinger also serves on the Board of Directors of
Charles Schwab & Co., Inc. and Charles Schwab Bank, and as a trustee of The Charles Schwab Family of Funds, Schwab
Investments, Schwab Capital Trust and Schwab Annuity Portfolios, all registered investment companies. Prior to assuming
his current role, he was most recently President and Chief Operating Officer of CSC. He served as Executive Vice President
and President – Schwab Investor Services (formerly the Individual Investor Enterprise) of CSC and Schwab from 2005 to
2007. He served as Executive Vice President and Chief Operating Officer – Individual Investor Enterprise of CSC and
Schwab from 2004 until 2005, and Executive Vice President and President – Corporate Services of Schwab from 2002 until
2004. Mr. Bettinger joined Schwab in 1995.
Mr. Allen has been Executive Vice President – Human Resources and Employee Services of CSC and Schwab since 2007.
He served as Senior Vice President – Human Resources of Schwab Investor Services from 2004 to 2007. Mr. Allen joined
Schwab in 2003 as Vice President – Human Resources of Schwab Investor Services. Before joining Schwab, Mr. Allen was
Vice President – Human Resources and Administration for GE Consumer Finance – Japan, based in Tokyo.
Mr. Brigeman has been Executive Vice President – Investor Services of CSC and Schwab since 2007. Mr. Brigeman was
Senior Vice President – Schwab Investor Services of Schwab from 2005 to 2007 and Senior Vice President – Schwab
Retirement Plan Services of Schwab from 2000 to 2005. Mr. Brigeman joined Schwab in 1996.
- 84 -
Ms. Dwyer has been Executive Vice President, General Counsel and Corporate Secretary of CSC and Executive Vice
President – Corporate Oversight of Schwab since 1996. Ms. Dwyer joined Schwab in 1996.
Mr. Martinetto has been Executive Vice President and Chief Financial Officer of CSC and Schwab since 2007. Mr.
Martinetto served as Senior Vice President and Treasurer of CSC and Schwab from 2003 to 2007 and Senior Vice President –
Individual Investor Finance of Schwab from 2002 to 2003. Mr. Martinetto joined Schwab in 1997.
Mr. McCool has been Executive Vice President – Institutional Services of CSC and Schwab since November 2008. Mr.
McCool served as Executive Vice President – Schwab Corporate and Retirement Services of CSC from 2007 until November
2008 and of Schwab from 2006 until November 2008. Mr. McCool served as Senior Vice President – Corporate Services of
Schwab from 2004 until 2006. Mr. McCool also served as President and Chief Executive Officer of The Charles Schwab
Trust Company (the “Trust Company”) from 2005 until it merged into Charles Schwab Bank, effective January 1, 2008. Mr.
McCool served as Senior Vice President – Plan Administrative Services of the Trust Company from 2004 until 2005, Chief
Operating Officer of the Trust Company from 2003 until 2004, and Vice President – Development and Business Technology
of the Trust Company from 2002 until 2003. Mr. McCool joined Schwab in 1995.
Ms. Saeger has been Executive Vice President and Chief Marketing Officer of CSC and Schwab since 2006. She served as
Executive Vice President – Brand Management and Marketing Communications of CSC and Schwab from 2004 until 2006.
Prior to joining Schwab, Ms. Saeger was Executive Vice President of Brand Marketing for Visa USA from 1997 to 2004.
Item 11. Executive Compensation
The information required to be furnished pursuant to this item is incorporated by reference from portions of the Proxy
Statement under “Compensation Information – Compensation Discussion and Analysis,” “Compensation Information –
Executive Compensation Tables – 2008 Summary Compensation Table,” “Compensation Information – Executive
Compensation Tables – 2008 Grants of Plan-Based Awards Table,” “Compensation Information – Executive Compensation
Tables – Narrative to Summary Compensation and Grants of Plan-Based Awards Tables,” “Compensation Information –
Executive Compensation Tables – 2008 Termination and Change in Control Benefits Table,” “Compensation Information –
Executive Compensation Tables – Outstanding Equity Awards as of December 31, 2008,” “Compensation Information –
Executive Compensation Tables – 2008 Option Exercises and Stock Vested Table,” “Compensation Information – Executive
Compensation Tables – 2008 Nonqualified Deferred Compensation Table,” “Compensation Information – Director
Compensation,” and “The Board of Directors – Compensation Committee Interlocks and Insider Participation.” In addition,
the information from a portion of the Proxy Statement under “Compensation Information – Compensation Committee
Report,” is incorporated by reference from the Proxy Statement and furnished on this Form 10-K, and shall not be deemed
“filed” for purposes of Section 18 of the Securities Exchange Act of 1934, nor shall it be deemed incorporated by reference in
any filing under the Securities Act of 1933.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters
Statement under “Security Ownership of Certain Beneficial Owners and Management,” and “Compensation Information –
Securities Authorized for Issuance Under Equity Compensation Plans.”
Item 13. Certain Relationships and Related Transactions, and Director Independence
Statement under “Transactions with Related Persons” and “The Board of Directors – Director Independence.”
- 85 -
Item 14. Principal Accountant Fees and Services

The information required to be furnished pursuant to this item is incorporated by reference from a portion of the Proxy
Statement under “The Board of Directors – Auditor Selection and Fees.”
PART IV
Item 15. Exhibits and Financial Statement Schedule
(a) Documents filed as part of this Report
1. Financial Statements
The financial statements and independent auditors’ report are included in “Item 8 – Financial Statements and Supplementary
Data” and are listed below:
Consolidated Statements of Income

Consolidated Balance Sheets
Consolidated Statements of Cash Flows
Consolidated Statements of Stockholders’ Equity
Report of Independent Registered Public Accounting Firm
2. Financial Statement Schedule
The financial statement schedule required to be furnished pursuant to this item is listed in the accompanying index appearing
on page F-1.
(b) Exhibits
The exhibits listed below are filed as part of this annual report on Form 10-K.
Exhibit
Number Exhibit
3.11 Fifth Restated Certificate of Incorporation, effective May 7, 2001, of the Registrant, filed as Exhibit
3.11 to the Registrant’s Form 10-Q for the quarter ended September 30, 2006 and incorporated herein
by reference.
3.13 Fourth Restated Bylaws, as amended on December 12, 2007, of the Registrant. Filed as Exhibit 3.13 to
the Registrant’s Form 10-K for the year ended December 31, 2007 and incorporated herein by
reference.
4.2 Neither the Registrant nor its subsidiaries are parties to any instrument with respect to long-term debt
for which securities authorized thereunder exceed 10% of the total assets of the Registrant and its
subsidiaries on a consolidated basis. Copies of instruments with respect to long-term debt of lesser
amounts will be provided to the SEC upon request.
10.4 Form of Release Agreement dated as of March 31, 1987 among BAC, Registrant, Schwab Holdings,
Inc., Charles Schwab & Co., Inc. and former shareholders of Schwab Holdings, Inc. (1)
- 86 -
Exhibit
Number Exhibit
10.57 Registration Rights and Stock Restriction Agreement, dated as of March 31, 1987, between the
Registrant and the holders of the Common Stock, filed as Exhibit 4.23 to Registrant’s Registration
Statement No. 33-16192 on Form S-1 and incorporated herein by reference.
10.72 Restatement of Assignment and License, as amended January 25, 1988, among Charles Schwab & Co.,
Inc., Charles R. Schwab and the Registrant, filed as Exhibit 10.72 to the Registrant’s Form 10-K for the
year ended December 31, 2004 and incorporated herein by reference.
10.253 Employment Agreement dated as of March 31, 2003 between the Registrant and Charles R. Schwab
(supersedes Exhibit 10.149), filed as Exhibit 10.253 to the Registrant's Form 10-Q for the quarter ended
June 30, 2003 and incorporated herein by reference. (4)
10.261 Purchase Agreement by and among The Charles Schwab Corporation, CS Capital Markets and Co.,
Schwab Associates and Co., UBS Securities LLC, and UBS Americas Inc., dated as of August 31, 2004,
filed as Exhibit 10.261 to the Registrant’s Form 10-Q for the quarter ended September 30, 2004 and
incorporated herein by reference. (3)
10.262 Equities Order Handling Agreement dated October 29, 2004 by and among UBS Securities LLC,
Schwab Capital Markets L.P., Charles Schwab & Co., Inc., and The Charles Schwab Corporation, filed
as Exhibit 10.262 to the Registrant’s Form 10-Q for the quarter ended September 30, 2004 and
10.267 Form of Notice and Restricted Stock Unit Agreement for Non-Employee Directors Under The Charles
Schwab Corporation 2004 Stock Incentive Plan, filed as Exhibit 10.267 to the Registrant's Form 10-K
for the year ended December 31, 2004 and incorporated herein by reference. (4)
10.271 The Charles Schwab Corporation Directors’ Deferred Compensation Plan, as amended through
December 8, 2004, filed as Exhibit 10.271 to the Registrant's Form 10-K for the year ended
December 31, 2004 and incorporated herein by reference. (4)
10.272 The Charles Schwab Corporation Deferred Compensation Plan, as amended through December 8, 2004,
filed as Exhibit 10.272 to the Registrant's Form 10-K for the year ended December 31, 2004 and
10.284 The Charles Schwab Severance Pay Plan, as Amended and Restated Effective January 1, 2006,
including Amendment Numbers 1 and 2, filed as Exhibit 10.284 to the Registrant's Form 10-K for the
year ended December 31, 2005 and incorporated herein by reference. (4)
10.288 Stock Purchase Agreement by and between the Registrant and Bank of America Corporation, dated as
of November 19, 2006 and incorporated herein by reference.
10.289 Form of Notice and Restricted Stock Agreement for Walter W. Bettinger under The Charles Schwab
Corporation 2004 Stock Incentive Plan dated February 20, 2007, filed as Exhibit 10.289 to the
Registrant’s Form 10-Q for the quarter ended March 31, 2007 and incorporated herein by reference. (4)
10.290 Summary of Non-Employee Director Compensation, filed as Exhibit 10.290 to the Registrant’s Form
10-Q for the quarter ended March 31, 2007 and incorporated herein by reference. (4)
10.294 Form of Notice and Restricted Stock Agreement for Joseph R. Martinetto under The Charles Schwab
Corporation 2004 Stock Incentive Plan dated May 18, 2007, filed as Exhibit 10.294 to the Registrant’s
Form 10-Q for the quarter ended June 30, 2007 and incorporated herein by reference. (4)
- 87 -
Exhibit
Number Exhibit
10.295 Form of Notice and Nonqualified Stock Option Agreement for Joseph R. Martinetto under The Charles
Schwab Corporation 2004 Stock Incentive Plan dated May 18, 2007, filed as Exhibit 10.295 to the
Registrant’s Form 10-Q for the quarter ended June 30, 2007 and incorporated herein by reference. (4)
10.296 Stock Purchase Agreement dated July 2, 2007 by and among Charles R. Schwab, Helen O. Schwab, The
Charles & Helen Schwab Living Trust, HOS Family Partners, LLC, 188 Partners, LP, and the Charles
& Helen Schwab Foundation, and The Charles Schwab Corporation, filed as Exhibit 10.296 to the
Registrant’s Form 10-Q for the quarter ended June 30, 2007 and incorporated herein by reference. (4)
10.297 Credit Agreement (364-Day Commitment) dated as of June 15, 2007 between the Registrant and the
financial institutions listed therein, filed as Exhibit 10.297 to the Registrant’s Form 10-Q for the quarter
ended June 30, 2007 and incorporated herein by reference.
10.298 Directed Employee Benefit Trust Agreement under the SchwabPlan Retirement Savings and Investment
Plan dated August 17, 2007, filed as Exhibit 10.298 to the Registrant’s Form 10-Q for the quarter ended
September 30, 2007 and incorporated herein by reference. (4)
10.299 Amendment to Credit Agreement (364-Day Commitment) dated as of June 15, 2007 between the
Registrant and the financial institutions listed therein, dated August 3, 2007, filed as Exhibit 10.299 to
the Registrant’s Form 10-Q for the quarter ended September 30, 2007 and incorporated herein by
reference. (4)
10.300 The Charles Schwab Corporation Employee Stock Incentive Plan, as amended and restated as of
December 12, 2007. Filed as Exhibit 10.300 to the Registrant’s Form 10-K for the year ended
10.301 The Charles Schwab Corporation 1992 Stock Incentive Plan, as amended and restated as of
10.303 The Charles Schwab Corporation Long-Term Incentive Plan, as amended and restated as of
10.304 The Charles Schwab Corporation Deferred Compensation Plan II, as amended and restated as of
10.305 The Charles Schwab Corporation Directors’ Deferred Compensation Plan II, as amended and restated as
of December 12, 2007. Filed as Exhibit 10.305 to the Registrant’s Form 10-K for the year ended
10.306 Form of Notice and Nonqualified Stock Option Agreement under The Charles Schwab Corporation
2004 Stock Incentive Plan. Filed as Exhibit 10.306 to the Registrant’s Form 10-K for the year ended
10.307 Form of Notice and Restricted Stock Agreement under The Charles Schwab Corporation 2004 Stock
Incentive Plan. Filed as Exhibit 10.307 to the Registrant’s Form 10-K for the year ended December 31,
2007 and incorporated herein by reference. (4)
- 88 -
Exhibit
Number Exhibit
10.308 The Charles Schwab Corporation Corporate Executive Bonus Plan, as amended and restated as of
10.309 Form of Notice and Premium-Priced Stock Option Agreement under The Charles Schwab Corporation
2004 Stock Incentive Plan, filed as Exhibit 10.309 to the Registrant's Form 10-K for the year ended
10.311 Form of Notice and Restricted Stock Agreement for Non-Employee Directors under The Charles
Schwab Corporation 2004 Stock Incentive Plan. Filed as Exhibit 10.311 to the Registrant’s Form 10-K
for the year ended December 31, 2007 and incorporated herein by reference. (4)
10.312 Form of Notice and Option Agreement for Non-Employee Directors under The Charles Schwab
Corporation 2004 Stock Incentive Plan. Filed as Exhibit 10.312 to the Registrant’s Form 10-K for the
10.313 Form of Notice and Performance-Based Restricted Stock Agreement under The Charles Schwab
Corporation 2004 Stock Incentive Plan. Filed as Exhibit 10.313 to the Registrant’s Form 10-K for the
10.314 Employment Agreement dated as of March 13, 2008 between the Registrant and Charles R. Schwab
(supersedes Exhibit 10.253), filed as Exhibit 10.314 to the Registrant’s Form 10-Q for the quarter ended
March 31, 2008 and incorporated herein by reference. (4)
10.315 Credit Agreement (364-Day Commitment) dated as of June 13, 2008 between the Registrant and the
financial institutions listed therein (supersedes Exhibit 10.297), filed as Exhibit 10.315 to the
Registrant’s Form 10-Q for the quarter ended June 30, 2008 and incorporated herein by reference.
10.316 From of Notice and Restricted Stock Agreement for Walter W. Bettinger under the Charles Schwab
Corporation 2004 Stock Incentive Plan dated October 1, 2008, filed as Exhibit 10.316 to the
Registrant’s Form 10-Q for the quarter ended September 30, 2008 and incorporated herein by reference. (4)
10.317 Form of Notice and Nonqualified Stock Option Agreement for Walter W. Bettinger under The Charles
Schwab Corporation 2004 Stock Incentive Plan dated October 1, 2008, filed as Exhibit 10.317 to the
Registrant’s Form 10-Q for the quarter ended September 30, 2008 and incorporated herein by reference. (4)
10.318 Form of Notice and Performance-Based Restricted Stock Agreement under the Charles Schwab
Corporation 2004 Stock Incentive Plan (supersedes Exhibit 10.313). (2,4)
10.319 Form of Notice and Restricted Stock Unit Agreement for Non-Employee Directors under the Charles
Schwab Corporation 2004 Stock Incentive Plan (supersedes Exhibit 10.267). (2,4)
10.320 The Charles Schwab Corporation Corporate Executive Bonus Plan, as amended and restated as of
October 23, 2008 (supersedes Exhibit 10.308). (2,4)
- 89 -
Exhibit
Number Exhibit
10.321 The Charles Schwab Corporation Long Term Incentive Plan, as amended and restated as of October 23,
2008 (supersedes Exhibit 10.303). (2,4)
10.322 The Charles Schwab Corporation Deferred Compensation Plan II, as amended and restated as of
October 23, 2008 (supersedes Exhibit 10.304). (2,4)
10.323 The Charles Schwab Corporation Directors’ Deferred Compensation Plan II, as amended and restated as
of October 23, 2008 (supersedes Exhibit 10.305). (2,4)
10.324 The Charles Schwab Severance Pay Plan, as amended and restated effective January 1, 2009
(supersedes Exhibit 10.284). (2,4)
10.325 The Charles Schwab Severance Pay Plan, as amended and restated effective April 1, 2009 (2,4)
12.1 Computation of Ratio of Earnings to Fixed Charges.
21.1 Subsidiaries of the Registrant.
23.1 Independent Registered Public Accounting Firm’s Consent.
31.1 Certification Pursuant to Rule 13a-14(a)/15d-14(a), As Adopted Pursuant to Section 302 of The
Sarbanes-Oxley Act of 2002.
31.2 Certification Pursuant to Rule 13a-14(a)/15d-14(a), As Adopted Pursuant to Section 302 of The
Sarbanes-Oxley Act of 2002.
32.1 Certification Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of The Sarbanes-
Oxley Act of 2002. (2)
32.2 Certification Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of The Sarbanes-
Oxley Act of 2002. (2)
(1) Incorporated by reference to the identically-numbered exhibit to Registrant’s Registration Statement

No. 33-16192 on Form S-1, as amended and declared effective on September 22, 1987.
(2) Furnished as an exhibit to this annual report on Form 10-K.
(3) Confidential treatment has been granted for portions of this exhibit.
(4) Management contract or compensatory plan.
- 90 -
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this
report to be signed on its behalf by the undersigned, thereunto duly authorized, on February 24, 2009.

(Registrant)
BY: /s/ Walter W. Bettinger II

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following
persons on behalf of the registrant and in the capacities indicated, on February 24, 2009.
Signature / Title Signature / Title
/s/ Walter W. Bettinger II /s/ Joseph R. Martinetto

Walter W. Bettinger II, Joseph R. Martinetto,
President and Chief Executive Officer Executive Vice President
and Chief Financial Officer
(principal financial and accounting
officer)
/s/ Charles R. Schwab /s/ William F. Aldinger III

Charles R. Schwab, Chairman William F. Aldinger III, Director
/s/ Nancy H. Bechtle /s/ C. Preston Butcher

Nancy H. Bechtle, Director C. Preston Butcher, Director
/s/ Donald G. Fisher /s/ Frank C. Herringer

Donald G. Fisher, Director Frank C. Herringer, Director
/s/ Stephen T. McLin /s/ Paula A. Sneed

Stephen T. McLin, Director Paula A. Sneed, Director
/s/ Roger O. Walther /s/ Robert N. Wilson

Roger O. Walther, Director Robert N. Wilson, Director
- 91 -
Index to Financial Statement Schedule
Page
Schedule II - Valuation and Qualifying Accounts F-2
Supplemental Financial Data for Charles Schwab Bank (Unaudited) F-3 – F-8
Schedules not listed are omitted because of the absence of the conditions under which they are required or
because the information is included in the Company’s consolidated financial statements and notes in
“Item 8 – Financial Statements and Supplementary Data.”
F-1
SCHEDULE II
Valuation and Qualifying Accounts

(In millions)
Balance at Additions Balance at

Beginning Charged End
Description of Year to Expense Other (1) Written off of Year
For the year ended December 31, 2008:
Allowance for doubtful accounts of

brokerage clients (2) $ 1 $ 13 $ 1 $ (11) $ 4

brokerage clients (2) $ 2 $ 6 $ 1 $ (8) $ 1

brokerage clients (2) $ 2 $ 4 $ - $ (4) $ 2
(1) Represents collections of previously written-off accounts.
(2) Excludes banking-related valuation and qualifying accounts. See "Item 8 - Financial Statements and Supplementary Data -
Notes to Consolidated Financial Statements - 6. Loans to Banking Clients and Related Allowance for Credit Losses."
F-2
Supplemental Financial Data for Charles Schwab Bank (Unaudited)
(Dollars in Millions)
The following supplemental financial data is presented in accordance with the Securities Exchange Act of 1934, Industry
Guide 3 – Statistical Disclosure by Savings and Loan Holding Companies. The accompanying unaudited financial
information represents Charles Schwab Bank (Schwab Bank), which is a subsidiary of The Charles Schwab Corporation.
Schwab Bank is a federal savings bank which commenced operations in 2003.
1. Three-year Net Interest Revenue and Average Balances
For the Year Ended December 31, 2008 2007 2006

Average Average Average Average Average Average
Balance Interest Rate Balance Interest Rate Balance Interest Rate
Assets:
Cash due from banks $ 1,007 $ 11 1.13% $ 66 $ 3 5.46% $ 74 $ 4 5.35%
Short term investments 2,283 69 3.04% 1,862 99 5.32% 685 36 5.22%
Federal funds sold 657 15 2.34% 595 31 5.14% 412 21 5.04%
Resale agreements - - - - - - 209 6 2.70%
Securities available for sale (1) 11,772 517 4.39% 7,335 399 5.44% 6,125 319 5.21%
Securities held to maturity 22 1 5.86% - - - - - -
Loans to banking clients (2) 4,829 227 4.70% 2,786 169 6.07% 2,157 128 5.93%
Other interest-earning assets 95 6 5.70% 78 5 6.16% 63 2 5.33%
Total interest-earning assets 20,665 846 4.10% 12,722 706 5.55% 9,725 516 5.31%
Non-interest-earning assets 211 132 53

Total Assets $ 20,876 $ 12,854 $ 9,778
Liabilities and Stockholder's Equity:

Interest-bearing banking deposits $ 19,203 104 0.54% $ 12,046 238 1.98% $ 9,135 200 2.19%
Total sources on which interest is paid 19,203 104 0.54% 12,046 238 1.98% 9,135 200 2.19%
Non-interest-bearing liabilities 779 134 104

Stockholder's equity 894 674 539
Total Liabilities and Stockholder's Equity $ 20,876 $ 12,854 $ 9,778
Net interest revenue 742 468 316

Net free funds $ 1,462 $ 676 $ 590
Provision for credit loss (17) (3) (1)
$ 725 $ 465 $ 315
Net yield on interest-earning assets 3.59% 3.68% 3.25%
(1)
(2)
Includes average principal balances of non-accrual loans.
F-3
2. Analysis of Change in Net Interest Revenue
An analysis of the year-to-year changes in the categories of interest revenue and interest expense resulting from changes in
volume and rate is as follows:
2008 Compared to 2007 2007 Compared to 2006

Increase (Decrease) Due to Increase (Decrease) Due to
Change in: Change in:
Average Average Average Average
Volume Rate Total Volume Rate Total
Interest-earning assets:
Cash due from banks $ 52 $ (44) $ 8 $ - $ (1) $ (1)
Short term investments 22 (52) (30) 61 2 63
Federal funds sold 3 (19) (16) 9 1 10
Resale agreements - - - (6) - (6)
(1)
Securities available for sale 241 (123) 118 63 17 80
Securities held to maturity - 1 1 - - -
(2)
Loans to banking clients 124 (66) 58 37 4 41
Other interest-earning assets 1 - 1 1 2 3
Total interest-earning assets $ 443 $ (303) $ 140 $ 165 $ 25 $ 190
Interest-bearing sources of funds:

Interest-bearing banking deposits $ 141 $ (275) $ (134) $ 64 $ (26) $ 38
Total sources on which interest is paid $ 141 $ (275) $ (134) $ 64 $ (26) $ 38
Change in net interest revenue $ 302 $ (28) $ 274 $ 101 $ 51 $ 152
Provision for credit loss (14) (2)
$ 260 $ 150
Changes that are not due solely to volume or rate have been allocated to rate.
(1)
(2)
Includes average principal balances of non-accrual loans.
F-4
3. Securities Available for Sale and Securities Held to Maturity
The amortized cost, estimated fair value, and gross unrealized gains and losses on securities available for sale and securities
held to maturity are as follows:
Gross Gross
Non-agency mortgage-backed securities 3,085 - 862 2,223
Corporate debt securities 1,762 2 31 1,733
Certificates of deposit 925 - 3 922
Asset-backed securities 866 - 44 822
U.S. agency notes 515 2 - 517
Total securities available for sale $ 15,356 $ 112 $ 1,022 $ 14,446
Asset-backed securities $ 243 $ 1 $ - $ 244
Total securities held to maturity $ 243 $ 1 $ - $ 244
Gross Gross
Corporate debt securities 804 1 21 784
Gross Gross
Corporate debt securities 677 - - 677
There were no securities classified as held to maturity at December 31, 2007 or 2006.
F-5
The maturities and related weighted-average yields of securities available for sale and securities held to maturity at
December 31, 2008, are as follows:
Within 1-5 5-10 After

U.S. agency mortgage-backed securities (1) $ - $ - $ 239 $ 7,990 $ 8,229
Non-agency mortgage-backed securities (1) - - 44 2,179 2,223
Corporate debt securities 490 1,243 - - 1,733
Certificates of deposit 774 148 - - 922
Asset-backed securities - 624 198 - 822
U.S. agency notes 316 201 - - 517
Total fair value $ 1,580 $ 2,216 $ 481 $ 10,169 $ 14,446
Total amortized cost $ 1,598 $ 2,265 $ 487 $ 11,006 $ 15,356
Weighted-average yield (2) 2.51% 2.66% 3.56% 4.16% 3.74%
Asset-backed securities $ - $ 217 $ 27 $ - $ 244
Total fair value $ - $ 217 $ 27 $ - $ 244
Total amortized cost $ - $ 216 $ 27 $ - $ 243
Weighted-average yield (2) - 5.26% 3.80% - 5.10%
(1)
Mortgage-backed securities have been allocated over maturity groupings based on final contractual maturities. Actual
maturities will differ from final contractual maturities because a certain portion of loans underlying these securities
require scheduled principal payments and borrowers have the right to prepay obligations.
(2)
The weighted-average yield is computed using the amortized cost at December 31, 2008.
4. Loans to Banking Clients and Related Allowance for Credit Losses
An analysis of the composition of the loan portfolio is as follows:
December 31, 2008 2007 2006 2005

Residential real estate mortgages $ 3,195 $ 2,101 $ 1,127 $ 1,193
Home equity lines of credit 2,662 1,234 1,192 746
Secured personal loans 187 102 9 -
Other 18 13 10 10
Total $ 6,062 $ 3,450 $ 2,338 $ 1,949
An analysis of nonperforming assets is as follows:
December 31, 2008 2007 2006 2005

Non-accrual loans $ 8 $ 4 $ 1 $ 1
Average non-accrual loans $ 6 $ 1 $ - $ -
F-6
An analysis of the allowance for credit losses on the loan portfolio is as follows:
December 31, 2008 2007 2006 2005

Balance at beginning of year $ 7 $ 4 $ 3 $ 2
Charge-offs (4) - - -
Recoveries - - - -
Provision for credit loss 17 3 1 1
Balance at end of year $ 20 $ 7 $ 4 $ 3
The maturities of the loan portfolio at December 31, 2008, are as follows:
Within 1-5 Over

1 Year Years 5 Years Total
(1)
Residential real estate mortgages $ - $ - $ 3,195 $ 3,195
Home equity lines of credit - 187 2,475 2,662
Secured personal loans - 187 - 187
Other 6 2 10 18
Total $ 6 $ 376 $ 5,680 $ 6,062
(1)
Maturities are based upon the contractual terms of the loans.
The interest sensitivity of loans with contractual maturities in excess of one year at December 31, 2008, is as follows:
1-5 Over
Years 5 Years Total
Loans with predetermined interest rates $ 2 $ 748 $ 750
Loans with floating or adjustable interest rates 374 4,932 5,306
Total $ 376 $ 5,680 $ 6,056
5. Summary of Credit Loss on Banking Loans Experience
December 31, 2008 2007 2006 2005

Average loans $ 4,831 $ 2,786 $ 2,162 $ 1,163
Allowance to year end loans .33% .20% .17% .17%
Allowance to nonperforming loans 235% 173% N/M N/M
Nonperforming assets to average loans and real estate owned .179% .143% .031% .041%
N/M Not meaningful.
6. Deposits from Banking Clients
2008 2007 2006

Amount Rate Amount Rate Amount Rate
Analysis of average daily deposits:
Certificates of deposits of $100,000 or more $ - - $ - - $ - -
Money market and other savings deposits 19,203 0.54% 12,047 1.98% 9,137 2.19%
Total deposits $ 19,203 $ 12,047 $ 9,137
At December 31, 2008, the Company had one certificate of deposit of $100,000 or more, in the amount of $104,000, with a
contractual maturity of three months or less.
F-7
7. Ratios
December 31, 2008 2007 2006 2005

Return on average stockholder’s equity 40.36% 34.31% 26.34% 14.23%
Return on average total assets 1.76% 1.83% 1.57% 1.08%
Average stockholder’s equity as a percentage
of average total assets 4.35% 5.33% 5.96% 7.60%
F-8
EXHIBIT 12.1
Computation of Ratio of Earnings to Fixed Charges

(Dollar amounts in millions, unaudited)
Year Ended December 31, 2008 2007 2006 2005 2004
Earnings from continuing operations before taxes on earnings $ 2,028 $ 1,853 $ 1,476 $ 1,027 $ 547
Fixed charges
Interest expense:
Deposits from banking clients 104 238 200 74 21
Payables to brokerage clients 55 329 426 378 113
Short-term borrowings 1 - - - -
Long-term debt 59 38 29 30 28
Other 24 18 24 19 10
Total 243 623 679 501 172
Interest portion of rental expense 62 60 55 55 71
Total fixed charges (A) 305 683 734 556 243
Earnings from continuing operations before taxes on earnings,

and fixed charges (B) $ 2,333 $ 2,536 $ 2,210 $ 1,583 $ 790
(1)
Ratio of earnings to fixed charges (B) ÷ (A) 7.6 3.7 3.0 2.8 3.3
Ratio of earnings to fixed charges excluding deposits from banking

(2)
clients and payables to brokerage clients interest expense 14.9 17.0 14.7 10.9 6.0
(1) The ratio of earnings to fixed charges is calculated in accordance with SEC requirements. For such purposes, "earnings" consist of
earnings from continuing operations before taxes on earnings and fixed charges. "Fixed charges" consist of interest expense as
listed above, and one-third of rental expense, which is estimated to be representative of the interest factor.
(2) Because interest expense incurred in connection with both deposits from banking clients and payables to brokerage clients is
completely offset by interest revenue on related investments and loans, the Company considers such interest to be an operating
expense. Accordingly, the ratio of earnings to fixed charges excluding deposits from banking clients and payables to brokerage
clients interest expense reflects the elimination of such interest expense as a fixed charge.
EXHIBIT 21.1
Subsidiaries of the Registrant

Pursuant to Item 601 (b)(21)(ii) of Regulation S-K, certain subsidiaries of the Registrant have been omitted
which, considered in the aggregate as a single subsidiary, would not constitute a significant subsidiary (as
defined in Rule 1-02(w) of Regulation S-X) as of December 31, 2008.
The following is a listing of the significant subsidiaries of the Registrant:
Schwab Holdings, Inc. (holding company for Charles Schwab & Co., Inc.), a Delaware corporation
Charles Schwab & Co., Inc., a California corporation
Charles Schwab Investment Management, Inc., a Delaware corporation
Charles Schwab Bank, a Federal Savings Association

EXHIBIT 23.1
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We consent to the incorporation by reference in the following Registration Statements of our report dated February 24, 2009 relating to the
consolidated financial statements and financial statement schedule of The Charles Schwab Corporation and the effectiveness of The Charles
Schwab Corporation’s internal control over financial reporting, appearing in this Annual Report on Form 10-K of The Charles Schwab
Corporation for the year ended December 31, 2008.
Filed on Form S-3:
Registration Statement No. 333-156152 (Debt Securities, Preferred Stock, Depositary Shares, Common Stock, Purchase
Contracts, Warrants, and Units Consisting of Two or More Securities)
Filed on Form S-4:
Registration Statement No. 333-48764 (Registration of common stock)
Filed on Form S-8:
Registration Statement No. 333-131502 (The Charles Schwab Corporation Deferred Compensation Plan II)
Registration Statement No. 333-101992 (The Charles Schwab Corporation 2004 Stock Incentive Plan)
Registration Statement No. 333-44793 (Charles Schwab Profit Sharing and Employee Stock Ownership Plan)
Registration Statement No. 333-48335 (The Charles Schwab Corporation Employee Stock Incentive Plan)
Registration Statement No. 333-32058 (CyBerCorp Holdings, Inc. 1996 Incentive Plan)
Registration Statement No. 333-71322 (The SchwabPlan Retirement Savings and Investment Plan)
Registration Statement No. 333-144303 (The Charles Schwab Corporation Employee Stock Purchase Plan)
/s/ Deloitte & Touche LLP
San Francisco, California

February 24, 2009
Exhibit 31.1
CERTIFICATION PURSUANT TO RULE 13a-14(a)/15d-14(a), AS ADOPTED PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Walter W. Bettinger II, certify that:
1. I have reviewed this annual report on Form 10-K of The Charles Schwab Corporation;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material
fact necessary to make the statements made, in light of the circumstances under which such statements were made, not
misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in
all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the
periods presented in this report;
4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as
defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be
designed under our supervision, to ensure that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in
which this report is being prepared;
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting
to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external purposes in accordance with generally accepted
accounting principles;
c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered
by this report based on such evaluation; and
d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred
during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual
report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control
over financial reporting; and
5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over
financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons
performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial
reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize
and report financial information; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in
the registrant's internal control over financial reporting.
Date: February 24, 2009 /s/ Walter W. Bettinger II

Exhibit 31.2
CERTIFICATION PURSUANT TO RULE 13a-14(a)/15d-14(a), AS ADOPTED PURSUANT TO

I, Joseph R. Martinetto, certify that:
1. I have reviewed this annual report on Form 10-K of The Charles Schwab Corporation;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material
fact necessary to make the statements made, in light of the circumstances under which such statements were made, not
misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in
all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the
periods presented in this report;
4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as
defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be
designed under our supervision, to ensure that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in
which this report is being prepared;
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting
to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external purposes in accordance with generally accepted
accounting principles;
c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered
by this report based on such evaluation; and
d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred
during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual
report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control
over financial reporting; and
5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over
financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons
performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial
reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize
and report financial information; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in
the registrant's internal control over financial reporting.
Date: February 24, 2009 /s/ Joseph R. Martinetto

Joseph R. Martinetto
Executive Vice President and Chief Financial Officer
Exhibit 32.1
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO
In connection with the Annual Report of The Charles Schwab Corporation (the Company) on Form 10-K for the year ended
December 31, 2008 (the Report), I, Walter W. Bettinger II, President and Chief Executive Officer of the Company, hereby
certify, pursuant to 18 U.S.C. section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002, that to the
best of my knowledge:
(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of
1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and
results of operations of the Company for the periods presented therein.
/s/ Walter W. Bettinger II Date: February 24, 2009

A signed original of this written statement required by Section 906 has been provided to The Charles Schwab Corporation
and will be retained by The Charles Schwab Corporation and furnished to the Securities and Exchange Commission or its
staff upon request.
Exhibit 32.2
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO
In connection with the Annual Report of The Charles Schwab Corporation (the Company) on Form 10-K for the year ended
December 31, 2008 (the Report), I, Joseph R. Martinetto, Executive Vice President and Chief Financial Officer of the
Company, hereby certify, pursuant to 18 U.S.C. section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act
of 2002, that to the best of my knowledge:
(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of
1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and
results of operations of the Company for the periods presented therein.
/s/ Joseph R. Martinetto Date: February 24, 2009

Joseph R. Martinetto
Chief Financial Officer
A signed original of this written statement required by Section 906 has been provided to The Charles Schwab Corporation
and will be retained by The Charles Schwab Corporation and furnished to the Securities and Exchange Commission or its
staff upon request.
B OA R D OF DI R E C TOR S
Charles R. Schwab Donald G. Fisher Paula A. Sneed

Chairman of the Board, The Founder and Chairman Emeritus Chairman and Chief Executive
Charles Schwab Corporation of the Board, Gap Inc., Officer, Phelps Prescott Group,
Age: 71. Director since 1986; a specialty retail clothing chain LLC, a strategy and management
term expires in 2011. Age: 80. Director since 1988; consulting firm
term expires in 2010. Age: 61. Director since 2002;
William F. Aldinger III Member of the Audit Committee; term expires in 2010.
Former President and Chief Nominating & Corporate Member of the Compensation
Executive Officer, Capmark Governance Committee. Committee; Nominating &
Financial Group Inc., Corporate Governance Committee.
a financial services company Frank C. Herringer
Age: 61. Director since 2005; Chairman of the Board of Roger O. Walther
term expires in 2010. Transamerica Corporation, Chairman and Chief Executive
Member of the Audit Committee; a financial services company Officer, Tusker Corporation,
Nominating & Corporate Age: 66. Director since 1996; a real estate and business
Governance Committee. term expires in 2011. management company
Chairman of the Nominating & Age: 73. Director since 1989; term
Nancy H. Bechtle Corporate Governance Committee; expires in 2011.
Former President and member of the Compensation Chairman of the Compensation
Chief Executive Officer, Committee. Committee; member of the
San Francisco Symphony Nominating & Corporate
Age: 71. Director since 1992; Stephen T. McLin Governance Committee.
term expires this year. Chairman and Chief Executive
Member of the Compensation Officer, STM Holdings LLC, which Robert N. Wilson
Committee; Nominating & offers merger and acquisition advice Chairman, Still River Systems,
Corporate Governance Committee. Age: 62. Director since 1988; a medical device company
term expires in 2011. Age: 68. Director since 2003;
Walter W. Bettinger II Chairman of the Audit Committee; term expires in 2011.
President and Chief Executive Officer, member of the Nominating & Member of the Compensation
The Charles Schwab Corporation Corporate Governance Committee. Committee; Nominating &
Age: 48. Director since October Corporate Governance Committee.
2008; term expires this year.
C. Preston Butcher
Chairman and Chief Executive
Officer, Legacy Partners,
a real estate development and
management firm
Age: 70. Director since 1988;
term expires this year.
Member of the Audit Committee;
Nominating & Corporate
Governance Committee.
i
C OR P OR AT E C ON TAC T S & I N FOR M AT ION
The Charles Schwab Corporation Annual Meeting Customer Service

101 Montgomery Street The annual meeting of stockholders Investor Services
San Francisco, CA 94104 will be held at 2 p.m. (Pacific Time) Current Clients: (800) 435-4000
(415) 636-7000 on Thursday, May 14, 2009, at 211 New Clients: (866) 855-9102
www.aboutschwab.com Main Street, San Francisco, CA. To Institutional Services
register, visit www.schwabevents.com. Advisor Services: (877) 687-4085
The Charles Schwab Corporation Corporate and Retirement Services:
is a leading provider of financial Stock Ownership Services (877) 456-0777
services, with more than 300 offices All stockholders of record are International &
and 7.4 million client brokerage welcome to participate in The Multicultural Services
accounts, 1.4 million corporate Charles Schwab Corporation In the U.S.: (877) 853-1802
retirement plan participants, 447,000 Dividend Reinvestment and Stock Outside the U.S.: (415) 667-6787
banking accounts, and $1.1 trillion in Purchase Plan, managed by Wells
client assets. Through its operating Fargo Bank, N.A. For information on Charles Schwab Foundation
subsidiaries, the company provides the Dividend Reinvestment and Stock Carrie Schwab Pomerantz,
a full range of securities brokerage, Purchase Plan, or for assistance on President, Charles Schwab
banking, money management, stock ownership questions, contact: Foundation, and
and financial advisory services to Transfer Agent & Registrar Senior Vice President
individual investors and institutions. Wells Fargo Bank, N.A. Call (877) 408-5438 or visit
Shareowner Services www.aboutschwab.com/community
CEO and CFO Certifications P.O. Box 64854
The Charles Schwab Corporation St. Paul, MN 55164 Legislative and Regulatory Affairs
has included as exhibits to its Annual (800) 468-9716 Jeffrey T. Brown, Senior Vice
Report on Form 10-K for the year www.wellsfargo.com/ President, Legislative and
ended December 31, 2008, filed shareownerservices Regulatory Affairs
with the Securities and Exchange 555 12th Street NW, Suite 740 N
Commission, certificates of its Chief The Charles Schwab Corporation Washington, DC 20004
Executive Officer and Chief Financial Office of the Corporate Secretary (202) 638-3750
Officer certifying the quality of the (415) 636-3087
company’s public disclosure. Trademarks or
Independent Auditors Registered Trademarks
Publications Deloitte & Touche LLP Charles Schwab, Schwab,
To obtain the company’s annual 50 Fremont Street Charles Schwab Bank, and
report, 10-K, 10-Q, quarterly earnings San Francisco, CA 94105 other trademarks appearing
report, or other publications without (415) 783-4000 herein, which may be indicated
charge, contact: www.deloitte.com by “®” and “™”, are registered
Charles Schwab Investor Relations trademarks or trademarks of
101 Montgomery Street Outside Counsel Charles Schwab & Co., Inc., in
San Francisco, CA 94104 Howard Rice Nemerovski Canady the U.S. and/or other countries.
(415) 636-2787 Falk & Rabkin These trademarks and registered
These documents may also be 3 Embarcadero Center, 7th Floor trademarks are proprietary to
viewed in the Investor Relations San Francisco, CA 94111-4024 Charles Schwab & Co., Inc., in
section of the company’s website (415) 434-1600 the U.S. and/or other countries.
at www.aboutschwab.com. www.howardrice.com
Visa and Visa Signature are
Investor Relations News Media registered trademarks of Visa
Richard G. Fowler, Senior Vice Greg Gable, Senior Vice President, International Service Association.
President, Investor Relations Corporate Public Relations
Call (415) 636-9869 or e-mail Media Hotline: (415) 636-5454
investor.relations@schwab.com E-mail: public.relations@schwab.com
ii
© 2009 The Charles Schwab Corporation. All rights reserved.
Strategy + Design by Unboundary, Inc., Atlanta, GA | Printing by Lithographix, Inc. | This entire report is printed on recycled paper.
101 Montgomery Street
San Francisco, CA 94104
(415) 636-7000
•
www.schwab.com
www.aboutschwab.com
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Schwab 2008 Annual Report

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Schwab 2008 Annual Report

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A

2008 FINANCIAL RESULTS 

• Net revenues of $5.2 billion, up 3 percent versus

Annual Revenues: $3.4 billion

corporate and retirement services

Schwab is in solid financial shape, and we finished 2008

NET NEW CLIENT ASSETS (1) TOTAL CLIENT ASSETS

$83.3 $160.2 $113.4 $1,239 $1,446 $1,137

2006 2007 2008 2006 2007 2008

$4,309 $4,994 $5,150 $891 $1,120 $1,230

2006 2007 2008 2006 2007 2008

EARNINGS PER SHARE

$.69 $.92 $1.06 34.3% 37.1% 39.4%

2006 2007 2008 2006 2007 2008

DISCIPLINED JUDGMENT IS CRUCIAL AS WE BALANCE NEAR-TERM PROFITABILITY,

I should note there’s no bright line here in terms

Net revenues 3% $ 5,150 $ 4,994 $ 4,309

N/M Not Meaningful.

THE CHARLES SCHWAB CORPORATION

120 Kearny Street, San Francisco, CA 94108

Securities registered pursuant to Section 12(b) of the Act:

DOCUMENTS INCORPORATED BY REFERENCE

Annual Report On Form 10-K

Item 1. Business ------------------------------------------------------------------------------------------------------------------------------- 1

Item 10. Directors, Executive Officers, and Corporate Governance -------------------------------------------------------------------- 83

Item 15. Exhibits and Financial Statement Schedule -------------------------------------------------------------------------------------- 86

General Corporate Overview

Acquisition and Divestitures

Business Strategy and Competitive Environment

Products and Services

Corporate and Retirement Services

Sources of Net Revenues

Item 1A. Risk Factors

The Company’s industry is characterized by aggressive price competition.

The Company relies on outsourced service providers to perform key functions.

Item 1B. Unresolved Securities and Exchange Commission Staff Comments

Item 3. Legal Proceedings

Item 4. Submission of Matters to a Vote of Security Holders

$150 Dow Jones U.S.

Standard & Poor' s 500 Index

December 31, 2003 2004 2005 2006 2007 2008

Issuer Purchases of Equity Securities

Total Number Approximate

Item 6. Selected Financial Data

Selected Financial and Operating Data

Financial Condition (at year end)

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of

2008 Compared to 2007

2007 Compared to 2006

CURRENT MARKET ENVIRONMENT

Year Ended December 31, 2008 2007 2006

Asset Management and Administration Fees

Net Interest Revenue

Year Ended December 31, 2008 2007 2006

Expenses Excluding Interest

Compensation and Benefits

Expenses Excluding Compensation and Benefits

Corporate and Retirement Services

LIQUIDITY AND CAPITAL RESOURCES

Minimum Capital Minimum to be

Acquisition and Divestiture

Less than 1-3 3-5 More than

Technology and Operating Risk

December 31, 2008 2007

• Net revenues of $5.2 billion, up 3 percent versus